AIF

What are Alternative Investment Funds (AIF) in India 

The Alternative Investment Funds AIF in India 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 a company or a body, or a Limited Liability Partnership (LLP). Hence, in India, AIFs are private funds that are otherwise not coming under the jurisdiction of any regulatory agency in India.

Categories of Alternative Investment Funds (AIFs)

As per Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, Alternative Investment Funds shall seek registration in one of the three categories

Category I: Mainly invests in start-ups, SMEs, or any other sector that the government considers economically and socially viable.

Category II: These include Alternative Investment Funds such as private equity funds or debt funds for which no specific incentives or concessions are given by the government or any other Regulator

Category III: Alternative Investment Funds such as hedge funds or funds that trade to make short-term returns or other open-ended funds and for which no specific incentives or concessions are given by the government or any other Regulator.

Tenure and Listing of Alternative Investment Funds / Schemes

For AIF scheme launched under Category I & II shall be closed-ended, the tenure shall be determined at the time of application and shall be for a minimum of three years.

Category III Alternative Investment Fund may be open-ended or close-ended.

Extension of the tenure of the close-ended Alternative Investment Fund may be permitted for up to two years subject to the approval of two-thirds of the unit holders by value of their investment in the Alternative Investment Fund. Without consent from unit holders, the Alternative Investment Fund shall fully liquidate within one year following the expiration of the fund tenure or extended tenure.

Units of close-ended Alternative Investment Fund may be listed on the stock exchange subject to a minimum tradable lot of one crore rupees. Such listing shall be permitted only after the final close of the fund or scheme. However, listing on stock Exchanges is purely voluntary.