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Invest in Alternative Investment Funds with Nivesh

Alternative Investment Funds are defined as privately pooled investment funds. They are categorized by SEBI as Category I AIF, Category II AIF, and Category III AIF. Assets under management can include start-ups, SME funds, infrastructure funds, private equity funds, or even hedge funds that may be trading in listed or unlisted derivatives depending on the type of fund.

Aspects of Portfolio Management Services (PMS)

Diversification

Diversification is one of the key features of these funds. They have considerable freedom to decide where to invest unlike most funds which are regulated by SEBI.

Non-traditional Investment Options

Non-traditional investment options are available to these funds which are not generally open to all investors.

Potential Returns

Potential returns are a factor considering the type of non-traditional assets these funds invest in.

Minimum Investment Amount

The minimum investment amount is INR 1 Crore depending on the type of AIF.

Types of Alternative Investment Funds

Alternative Investment Funds in India are categorized into 3 types are per SEBI rules

Category I

Category I are funds with strategies to invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable. These invest in Startups, SME’s, Social ventures, Infrastructure funds, Angel funds, or Venture Capital Funds
  • Venture Capital Fund
  • SME Funds
  • Social Venture Funds
  • Infrastructure Funds

Category II

Category II are funds which cannot be categorized as Category I AIFs or Category III AIFs. These funds do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in the Regulations. Private Equity debt funds that invest in real estate funds, funds for distressed assets, funds of funds, etc.
  • Real Estate Funds
  • Private Equity Funds
  • Funds for Distressed Assets

Category III

Category III are type of fund that invests in Hedge funds or funds which trade with the purpose of making short-term returns and can employ complex and diverse trading strategies, like using arbitrage, derivatives trading, and open-ended funds.
  • Hedge Funds
  • Private Investments in Public Equity

Aspects of Alternative Investment Funds

Alternative Investment Funds raise money to form an investment fund pool that invests in non-traditional assets classes. These are asset classes that investors may not have direct access through regular methods like Mutual Funds or Debt. Money can be raised from any investor of Indian, foreign, or non-resident origin for such funds.

These types of funds are primarily aimed at High-Net-worth individuals who are already accustomed and well versed with the investing world. While the potential for returns these funds offer is high, so are the risks.

So, Indian residents, Non-Residents (NRI’s), and Foreign Nationals can invest in Alternative Investment Funds.

Investors who are willing to meet the below criteria should invest in Alternative Investment Funds:

  • Have a large amount to invest in one instrument
  • Ability to withstand the risk
  • Are acceptable with lock-in periods
  • Are acceptable with lower regulatory control/ interventions

Alternative Investment Funds are taxed according to their category.

Category 1 and 2 AIFs are accorded pass-through status. This means that the income on the fund is not taxed, only the income or profit booked by the investor is taxed. The tax is as per the income slab of the investor. Capital gains the fund makes on the stocks are taxed depending on the holding period that is short term or long term.

Category 3 AIFs are not granted pass-through status. The income generated by such funds is taxed as high as 42.7% depending on various factors of the gains received. Factors can include, dividend, nature of gain, short term or long term, business income among others.

9,134

Partners in 772 cities across India

58,505

Customers spread over 3,000 pincodes

48,54,650

Transactions Executed

Rs. 6,478

Crore- Transaction Value

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