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An Alternate Investment Fund (AIF) is a privately pooled investment vehicle that collects funds from investors, whether Indian or foreign, for investing in accordance with a defined investment policy for the benefit of its investors. The AIF registration process is regulated by the Securities and Exchange Board of India (SEBI) under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
AIFs are designed for sophisticated investors and are intended to pool capital for investing in assets not typically covered by traditional investment vehicles such as stocks and bonds. These can include investments in private equity, venture capital, hedge funds, real estate, or other non-traditional asset classes.
Types of AIFs:
- Category I AIFs:
- These funds invest in areas that are socially or economically beneficial, such as start-ups, SMEs, social ventures, infrastructure, and other sectors that promote development.
- Category I AIFs receive various incentives or favorable tax treatment from the government.
- Category II AIFs:
- These funds invest in assets such as private equity or debt funds that do not fall under Category I or Category III.
- Category II funds are typically involved in strategies such as venture capital or private equity funds.
- Category III AIFs:
- These funds employ complex trading strategies, such as hedge funds, derivatives, or long-short strategies.
- Category III AIFs are involved in more speculative investment approaches and generally target high-net-worth individuals (HNIs) or institutional investors.
Eligibility Criteria for AIF Registration:
Fund Structure:
- AIFs can be established as a Trust, Company, or Limited Liability Partnership (LLP) in India.
Sponsor/Manager Requirements:
- The sponsor or manager of the AIF must be a legal entity with adequate professional expertise and experience in fund management.
- The sponsor should have a net worth of at least INR 10 crore and a proven track record in fund management or related fields.
- At least two key personnel should be experienced in managing alternative investments.
Minimum Investment:
- The minimum investment for an investor in an AIF is INR 1 crore (approximately), and the minimum corpus (fund size) of the AIF must be INR 20 crore.
Compliance:
- The AIF must adhere to all SEBI regulations regarding governance, investor protection, and reporting.
- The fund should have a clear investment policy, including specific asset allocation and risk management guidelines.
- The AIF should be able to make investments in accordance with its investment objective and within the prescribed guidelines.
Professional Qualifications:
- The individuals responsible for managing the AIF (e.g., fund managers) should have relevant professional qualifications or significant experience in the financial services industry.