Alternative Investment Funds, or AIFs, are privately pooled investment vehicles that are established for investing in asset classes other than the conventional equity and debt instruments. In India, the regulatory framework for AIFs is under the purview of the Securities and Exchange Board of India through the SEBI (Alternative Investment Funds) Regulations, 2012. Such funds would predominantly be availed of by sophisticated investors such as high-net-worth individuals, family offices, institutions, and corporates desirous of diversified higher-risk investment avenues. AIF management plays a very important role in structuring, operating, and governing such funds in compliance with regulatory requirements while ensuring value delivery to investors.
AIF Management deals with the professional management or operation of an Alternative Investment Fund, right from its creation to its exit. It covers all aspects, from structuring of the fund to its registration with SEBI; investment management in accordance with the stated investment strategy of the fund, ensuring concomitant compliance with the regulatory requirements, and investor interest.
An AIF Manager or Investment Manager is expected to make decisions concerning investment in securities, risk management, regulatory filing, disclosures, and communications with investors. Proper AIF management facilitates the operation of the fund within the ambit of SEBI, and offers transparency, governance standards, value creation for the investors in a sustained manner, along with mitigating legal and financial risks.
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AIFs in India are classified into three categories under SEBI (AIF) Regulations, 2012, based on investment objective, risk profile, and strategy.
Development and
Impact-Oriented Funds
Private Capital and
Growth Funds
Trading and High-Risk
Strategy Funds
AIFs in India are regulated by the SEBI (Alternative Investment Funds) Regulations, 2012, along with various circulars and amendments issued from time to time. Compliance is a continuous obligation on the AIF Manager and Sponsor.
SEBI has introduced several important reforms to strengthen governance and prevent misuse of AIF structures.
Effective AIF management is crucial due to the high-value, high-risk, and highly regulated nature of alternative investments.
Management of AIFs is an essential activity that falls at the intersection of regulatory compliance, investment discipline, and investor protection. Not only has SEBI specified a rigorous regime concerning the registration, governance, investment limits, disclosures, and fiduciary duties of AIFs, but it is necessary that the managers of AIFs ensure that they conduct themselves with a high degree of transparency and accountability. The latest changes in SEBI regulations indicate that SEBI is making a serious effort to ensure that such funds are not misused, which would affect the integrity of the markets. Thus, the need for proper management of AIFs is not merely a regulatory requirement but has a pivotal role to play in ensuring the success of alternative investment funds in India.
An Alternative Investment Fund is a privately pooled investment vehicle that invests in asset classes other than traditional equity and debt, such as private equity, venture capital, real estate, hedge strategies, and structured investments. AIFs in India are regulated by SEBI.
AIF Management refers to the end-to-end legal, regulatory, and operational management of an Alternative Investment Fund. This includes fund structuring, SEBI registration, investment compliance, reporting, governance, investor communication, and exit or winding-up support.
AIFs are regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Alternative Investment Funds) Regulations, 2012, along with subsequent amendments and circulars.
AIFs are generally subscribed to by high-net-worth individuals (HNIs), family offices, institutional investors, corporates, and sophisticated investors seeking alternative and higher-risk investment opportunities.
Yes. No entity can operate or raise funds as an AIF without obtaining prior registration from SEBI.
An AIF can be set up as a trust, limited liability partnership (LLP), company, or any other permitted legal structure, subject to SEBI eligibility requirements.
Category I AIFs invest in socially or economically desirable sectors such as startups, infrastructure, SMEs, and social ventures. These funds focus on long-term growth and development.
Category II AIFs include private equity funds, debt funds, real estate funds, and funds of funds. They generally invest in unlisted companies and real assets and follow a balanced risk-return approach.
Category III AIFs employ complex trading strategies, may use leverage and derivatives, and focus on short-term returns. Hedge funds and structured strategy funds fall under this category.
The minimum investment amount is ₹1 crore per investor. A reduced limit of ₹25 lakh applies to employees or directors of the AIF or its Manager.
