6 Dec 2019

Alternative Investment Funds (AIFs)2 min read

Sources: SEBI & Arthapedia

SEBI is toying with the idea of introducing direct plans for alternative investment funds and portfolio management schemes.

Definition of AIFs

  • In India, alternative investment funds (AIFs) are defined in Regulation 2(1)(b) of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012. 
  • It refers to any privately pooled investment fund, (whether from Indian or foreign sources), in the form of a trust or a company or a body corporate or a Limited Liability Partnership(LLP) which are not presently covered by any Regulation of SEBI governing fund management (like, Regulations governing Mutual Fund or Collective Investment Scheme)nor coming under the direct regulation of any other sectoral regulators in India-IRDA, PFRDA, RBI.
  • Hence, in India, AIFs are private funds which are otherwise not coming under the jurisdiction of any regulatory agency in India.

Types of AIFs

  • Category I: AIFs which 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 and shall include venture capital funds, SME Funds, social venture funds, infrastructure funds and such other Alternative Investment Funds as may be specified
  • Category II AIF:  AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012. Various types of funds such as real estate funds, private equity funds (PE funds), funds for distressed assets, etc. are registered as Category II AIF
  • Category III AIF: AIFs which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs

Fundraising and investment restrictions for AIFs

  • AIFs raise funds through private placement and they cannot accept from an investor an investment of value less than Rs. 1 Cr. 
  • The fund or any scheme of the fund cannot have more than 1000 investors and each Scheme should have a corpus of Rs. 20 Crore.
  • The manager or sponsor/ promoter of the AIF should have a continuing interest in the AIF of not less than 2.5% of the initial corpus or Rs.5 crore whichever is lower.
  • AIFs of Category I and II are not permitted to invest more than 25% of the investible funds in one Investee Company while it is 10% for Category III AIFs.

30 Responses

  1. I found your blog website on google as well as inspect a few of your very early articles. Continue to maintain the great operate. I simply additional up your RSS feed to my MSN Information Visitor. Seeking forward to learning more from you in the future!?

  2. Hi, Neat post. There is a problem with your site in internet explorer, would check this IE still is the market leader and a big portion of people will miss your wonderful writing because of this problem.

  3. After study a few of the blog posts on your web site currently, and also I truly like your way of blogging. I bookmarked it to my book marking internet site listing and will certainly be examining back quickly. Pls check out my web site too and also let me know what you think.

  4. There are some interesting times in this write-up but I don?t know if I see all of them center to heart. There is some credibility yet I will certainly take hold opinion until I look into it even more. Excellent post, thanks and we desire more! Contributed to FeedBurner also

  5. There are certainly a great deal of details like that to consider. That is a great indicate raise. I provide the thoughts over as basic inspiration but clearly there are concerns like the one you bring up where the most important point will certainly be working in truthful good faith. I don?t understand if best methods have actually arised around points like that, but I make sure that your work is clearly recognized as a fair game. Both boys and ladies feel the impact of simply a moment?s satisfaction, for the rest of their lives.

  6. Cool blog! Is your theme custom made or did you download it from somewhere? A design like yours with a few simple tweeks would really make my blog shine. Please let me know where you got your theme. Bless you|

  7. I just want to tell you that I am newbie to blogs and honestly loved your blog. Very likely I’m planning to bookmark your website . You absolutely come with tremendous posts. With thanks for revealing your web-site.

  8. I simply want to tell you that I’m newbie to blogs and truly savored you’re page. More than likely I’m likely to bookmark your blog post . You surely have great articles and reviews. Many thanks for revealing your blog site.

Leave a Reply

Pin It on Pinterest

Share This