In India, an only way used to create financial assets was to invest your money in the traditional investment categories like bonds, stocks, and real estate. But, with an alarming tribe of the high net-worth investors in our country, there’s a constant rise in demand for the non-conventional investment schemes like AIF investment options.
What are AIF’s? Alternative Investment Funds or AIF’s are a class of the privately pooled vehicle to invest in private equity, hedge funds and real estate. While the AIFs regulations were formulated over 6 years before by SEBI, they have gained acceptance among ultra-rich as robust investible platforms in India. AIFs aren’t covered by the present jurisdiction of any governing body in India, but they are classified and described in detail in the Regulation 2 (1). Investors might find these products a bit complex and will be reluctant in investing in it. The AIF investment advisors play an important role in bridging the knowledge gap. Different Types of AIF Based on the current SEBI classification, the private investment funds are divided in three unique categories and with a minimum qualifying amount for the schemes being INR 20 Crores. An only exception to the rule is ‘angel fund’ that is the subcategory of first Category of AIFs, since they have the lower qualifying criteria as per the fund corpus at INR 10 crores. Check out the table to understand it better: Category I Angel Funds Social Venture Funds Infrastructure Funds Venture Capital Funds SME Funds Category II Debt Fund Private Equity Category II Pipe Funds Hedge Funds AIFs mainly pitch in the investments under 3 broad categories. These categories will be granted registration on the same platform with the board. You can approach AIF Investment Company to get access to the data on various schemes and strategies. Investing in AIFs – Things to Know Investment in all 3 categories will be subject to following conditions; · Every AIF scheme will have corpus of INR 20 crore; · AIF can raise funds from investor whether foreign or Indian or NRI by its units; · The sponsor or the manager will have the continuing interest of not under 2.5% or INR 5 crore, whichever comes lower in a form of the AIF investment and this interest will not be through a waiver of the management fees. · AIF will not accept an investment value from the investor below INR 1 crore. · Fund will not solicit and collect funds other than private placement; · No AIF scheme will have more than a thousand investors; · Manager or sponsor will disclose their AIF investment to the investors; Final Words As we can see, alternative investments are growing in popularity among the masses and making a way in the portfolios of high-net worth individual investors. Thus, if you are among them, you should understand the benefits and restrictions when investing in the Alternative Investment Funds through PMS AIF World. Alternative investments generally don’t correlate to the stock market that means they add good diversification to the portfolio and help to mitigate volatility. Whereas, just like other investment options, in AIFs, the rate of return isn’t guaranteed, there’s the potential of going higher than the traditional investments via inflation hedging and strong diversification.
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January 2021
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