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.