Alternative Investment Fund [AIF] are a class of pooled investment funds which invest in venture capital, real estate, private equity, hedge funds, managed futures. In other words, an AIF refers to an investment which is different from the conventional class of assets such as stocks, debt securities, etc. These privately pooled vehicles that collect money from sophisticated private investors who wish to diversify their portfolio and choose alternative modes of investments.
Alternative Investment Fund [AIF] are governed and regulated by the Securities & Exchange Board of India (SEBI). AIF’s are not classified under the Mutual fund regulations laid down by the SEBI. AIF’s are defined under Regulation 2(1) (b) of the SEBI (Alternative Investment Funds) Regulation, 2012 as “privately held and managed pool of investment fund of either domestic or foreign origin, organised in the form of a body corporate, company, LLP (limited liability partnership), or a trust. An AIF can be established in any of the forms mentioned above. Funds collected from these sophisticated investors are invested in accordance with the Private Placement Memorandum and the investment policy of the AIF.
AIF’s are private pooled investment funds and are not available through the forms of public issues (like Initial Public Offerings) which are applicable to Mutual Funds or other collective investment Schemes.
Generally, high net worth individuals and institutions invest in Alternative Investment Funds as it requires a high investment amount, unlike Mutual Funds
As per the AIF Regulation 2012, AIF is a fund established in India whether as a Trust or a Company or a LLP which is ::
- A Privately pooled investment vehicle that pools funds from sophisticated investors and invests in accordance with defined investment policy to benefit its investors.
- Is not an entity registered under the SEBI (Collective Investment Schemes) Regulations, 1999 OR SEBI (Mutual Funds) Regulations, 1996 OR any other regulations issued by SEBI pertaining to pooling of funds or fund management.
Published by
Corpzo Ventures Private Limited
Category I Alternative Investment Fund
Funds which invest in economically and socially viable early-stage StartUps, Small and Medium Enterprises and new businesses with unique products or services with high potential for growth. Several promotional and incentivizing initiatives have been taken by the government for such funds due to the growth prospect and employment creation fuelled by such funds. These funds have proved to be very helpful to the startup ecosystem in India.
A] Category I comprises the following funds:
➲ Venture Capital Fund (VCF)
Venture Capital Funds are Category I Alternative Investment Funds which provide funding to startups, early-stage venture capital projects or to a small or medium-sized business, to own a part of its equity.
VC’s generally prefer funding businesses, that are already established or that are in their growth stage & have a long-term potential to mitigate their risk of losing investments.
VC’s act as a pool which collects money from various investors who are willing to undertake equity investments in ventures. VC’s, in turn invest this money, in multiple prospective projects including start-ups and SME’s. Such investments are made considering a calculated risk after taking elaborate note of several factors linked to the growth of the projects they invest in.
Unlike any collective investment schemes or mutual funds or hedge funds, investors of a VC get a pro rata share of every business the VC has invested in.
High Net Worth Individual Investors, from India and abroad, who seek high risk-high return ratio highly prefer investing in Venture Capital Form of AIF, Thus, contributing towards the growth of our economy.
➲ Angel Fund [AF]
An “Angel Investor” refers to an individual who is willing to invest in and “ANGEL FUND”. Angel funds are pretty much similar to Venture Capital Funds. The primary difference between the two is what money they use to invest.
This kind of funds comprises of various “angel” investors who contribute to the pool of funds known as the “ANGEL FUND”. Such funds prefer to invest in early-stage or budding start-ups for their growth.
When and “Angel Investor” invests in such funds, they are issued units of such fund. Angel Funds have a comparatively higher risk-return ratio. The source of returns on investments by such funds are the dividends from the profits that their investee companies make once they achieve growth and profitability.
View all posts by Corpzo Ventures Private Limited