Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle for investing it in accordance with a defined investment strategy or in structured investment product by the fund houses for the benefit of its investors.
Categories of AIF: There are 3 categories of AIF.
o Venture Capital Fund
o SME Funds
o Social Venture Funds
o Infrastructure Funds
o Real Estate Funds
o Private Equity Funds
o Funds for Distressed Assets
o Hedge Funds
o Private Investments in Public Equity
AIFs which invest in start-up or early-stage ventures, social ventures, SMEs, infrastructure, or other sectors which regulator thinks beneficial as socially or economically shall be considered as category 1 AIF.
AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing, it may take borrowings but only to the extent of permissible limit or for operational requirements.
AIFs which uses diverse or complex trading strategies and may use high leverage and can invest in listed or unlisted derivatives
An AIF may raise funds from any High Networth Investor (HNI) whether Indian, foreign or non-resident Indians, who may be comfortable with risk and reward associated to investing in primarily unlisted or less liquid securities. However, the AIF shall not accept an investment of less than 1 crore from any of its investors.