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Alternate Investment Funds (AIF)

The ‘Alternative Investment Funds (AIF)’ is primarily a privately pooled investment vehicle, regulated by SEBI Regulations,2012. The word ‘Privately Pooled’, denotes that the fund is pooled from selected investors & not from the general public at large. This is the most unique feature that differentiate it from other type of investment funds available in the market. Alternative Investments evolved over time to cater the requirements of sophisticated investors such as institutional investors managing pools of funds & HNIs who have high risk-taking capability & need more sophisticated avenues than traditional investment options. AIFs are meant to complement traditional investments for such investors by improving their risk-adjusted return over the long term.

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  1. Investors in AIF

    2. Large institutional funds such as pension fund; investment fund; insurance companies; endowment funds; investment banks; family offices; HNIs; fund of funds & AIF managers themselves.


  2. Categories of AIFs
    1. Category I AIF
    2. Category II AIF
    3. Category III AIF

  3. Types of AIF’s
    1. Venture Capital Fund
    2. Angel Fund
    3. Private Equity Fund
    4. Debt Fund
    5. Infrastructure Fund
    6. SME Fund
    7. Hedge Fund
    8. Social Venture Fund

  4. As per SEBI Regulation,2012 makes it mandatory for AIF governance structure to be robust & ensure that the sponsor, manager, trustee & other associated parties including service providers acts with the highest level of transparency, integrity & trust for the interest of the unit holders (investors). There shall be written policies & organizational structure in place to ensure its compliance.

  5. AIFs shall ensure transparency & disclosure of information about Financial, risk management, operational, portfolio, transactional information regarding fund investments, any fee ascribed or charged, any material liability, or any change in the control of the Sponsor or Manager or Investee Company periodically to all the investors as per SEBI

  6. All AIFs shall submit reports to SEBI in their prescribed format within 7 calendar days from the end of the quarter/month as the case may be. Further SEBI may at any time call upon the AIF to file reports with respect to the activities carried on by the AIF & this makes it highly regularized & add to its transparency.

  7. On an average, AIF investment horizon in portfolio companies could range from 3-7 years or slightly more depending upon the category of AIF, maturity profile of the fund cycle & market conditions.

  8. In general, the exist options comprise the following routes:
    1. Offer for Sale through an Initial Public Offer (IPO)
    2. Secondary Sale (Trade Sale)
    3. Strategic Sale (M & A Exit)
    4. Corporate/ Promoter Buy back
    5. Corporate Liquidation
    6. Pure Debt Fund Exits