Alternative Investment Funds are privately pooled investment vehicles that collect funds from sophisticated investors to invest in private equity, real estate, hedge strategies, start-ups, infrastructure and other opportunities beyond conventional securities. AIFs may be established as a company, trust or other bodies corporate including limited liability partnerships — strictly regulated by SEBI under the AIF Regulations.
Unlike PMS where each client has a separate portfolio, AIF pools investor capital and issues units — similar to a mutual fund but with far broader mandates and access to alternative assets.
Invest in private equity, unlisted companies, real estate, structured credit, venture capital and complex derivatives — asset classes unavailable through mutual funds or PMS.
Category III AIFs can deploy leverage up to 200% gross exposure — a powerful tool for hedge and long-short strategies unavailable in any other retail or HNI product in India.
Income generated by Category I and II AIFs is taxed directly in the investor's hands — not at the fund level — preserving the character of returns and offering efficient tax treatment.
SEBI classifies all AIFs into three distinct categories — each targeting different asset classes, structures and investor profiles.
AIFs that invest in start-ups, early-stage ventures, social ventures, SME funds, and infrastructure — sectors considered economically or socially desirable by the government or regulators. These often attract regulatory incentives. Only close-ended funds are in Category I.
Funds that do not leverage or borrow beyond operational requirements and do not fall under Category I or III. This is the largest category by AUM — housing private equity, debt funds, real estate funds and fund-of-funds. Only close-ended funds are in Category II.
Funds that employ diverse or complex trading strategies including derivatives on listed or unlisted assets. Typically hedge funds fall here. The only AIF category that can be open-ended and use leverage up to 200%. Cat III has grown at approximately 75% CAGR over 8 years.
Key advantages that make AIF compelling for Ultra-HNIs and institutions seeking alpha beyond conventional markets.
AIF gives you access to strategies and asset classes completely unavailable through mutual funds or PMS — from private equity to leveraged hedge strategies.
Qualified and experienced Portfolio Managers backed by strong research teams manage your AIF — experts in navigating complex alternative asset strategies beyond the reach of standard investment products.
Portfolio managers build and manage each mandate with the specific strategy in mind — including Sharia-compliant mandates, restricted lists, or sector-focused approaches designed for the investor's precise objectives.
AIF can be more aggressive than mutual funds or PMS and has the potential to generate superior returns. Portfolio managers may hold meaningful exposure to high-conviction positions as long as they deliver growth.
Diversification is essential for HNIs with large portfolios. AIF allows investors to diversify into uncorrelated alternative assets — acting as a cushion during equity market volatility.
Category I & II AIFs carry pass-through status — income or loss is taxed in the investor's hands at the individual level, not at the fund level, preserving the character of returns and offering significant tax advantages.
SEBI-reported AIF industry data (₹ Crores) — illustrating the scale and growth of India's alternative investment landscape.
| Category / Fund Type | Commitments Raised (₹ Cr) | Funds Raised (₹ Cr) | Investments Made (₹ Cr) |
|---|---|---|---|
| Infrastructure Fund | 13,523 | 8,226 | 7,061 |
| Social Venture Fund | 3,242 | 2,091 | 585 |
| Venture Capital Fund | 40,174 | 21,871 | 17,950 |
| SME Fund | 1,182 | 224 | 186 |
| Category I Total | 58,120 | 32,413 | 25,783 |
| Category II (Real Estate, PE, Debt Funds) | 5,61,920 | 2,40,312 | 2,20,406 |
| Category III (Long-only, Hedge Funds) | 74,481 | 66,264 | 65,155 |
| Grand Total (All Categories) | 6,94,521 | 3,38,990 | 3,11,343 |
* Source: SEBI. Figures in ₹ Crores. For indicative purposes only. Subject to revision.
What makes AIF a powerful addition to a sophisticated investor's portfolio.
AIF presents plans tailored to individual income, budget, age and ability to undertake risks — highly personalised for each investor.
Minimizes the risks involved in investing and increases the chance of making profits through active risk management and diversification.
Diversification of portfolio across conventional and alternative asset classes — acting as a cushion during equity market volatility.
AIF can be more aggressive with the potential to generate higher returns. Portfolio managers hold conviction positions as long as they deliver growth.
Category III AIFs can deploy up to 200% gross leverage — enabling strategies and returns unavailable in any other retail or HNI product in India.
High accountability of the fund manager towards portfolio performance — with full transparency and regular reporting to investors.
Category I & II AIFs offer pass-through tax status — income is taxed in the investor's hands, not at the fund level, preserving the nature of returns.
Curated AIF offerings distributed on a non-advisory basis through our platform.
Identifies businesses poised to benefit from India's decade-long growth runway.
Fund-of-funds providing diversified exposure across top AIF managers.
Private equity fund targeting mid-market Indian businesses with operational value creation.
Diversified long-only equity strategy with an alpha focus across market caps.
Long-short strategy combining systematic and active approaches for enhanced alpha.
High-conviction equity portfolio targeting India's fastest-rising companies.
Long-only growth strategy focused on quality businesses with compounding potential.
How AIF compares against other investment avenues across key parameters.
| Feature | AIF | PMS | Mutual Fund |
|---|---|---|---|
| Target Investors | Ultra-HNIs & Institutions | HNIs seeking personalised management | First-time to long-term investors |
| Minimum Investment | ₹1 Crore | ₹50 Lakh | ₹500 (SIP) / ₹5,000 (Lumpsum) |
| Fund Pooling | Pooled — unit accounting like MF | No pooling — separate portfolio per client | Pooled investment vehicle |
| Ownership | Investor holds units of the AIF | Investor owns individual securities directly | Investor owns units of the fund |
| Segregation | Not required | Every client segregated — separate demat | Not required |
| Use of Leverage | Cat III: up to 200% gross exposure | Not allowed | Not allowed |
| Lock-in / Tenure | Min 3 years Cat I & II; Cat III open-ended possible | No hard lock-in; exit load may apply | No hard lock-in; exit load may apply |
| Number of Investors | Max 1,000 per fund (49 for angel funds) | No min / max investors | Min 20; no single investor > 25% corpus |
| Documentation | Single form + PPM | Multiple forms: trading, demat, bank account | Single application form |
| Regulation | SEBI — AIFR | SEBI | SEBI |
* As per current SEBI regulations. Subject to change. Please consult your investment / tax adviser.
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