Question 1

What is the minimum investment for AIFs?

Accepted Answer

As per SEBI regulations, the minimum investment for Alternative Investment Funds is ₹1 Crore. For Angel Funds specifically, the minimum is ₹25 Lakhs per investor. AIFs can have a maximum of 1000 investors per scheme, ensuring exclusivity and meaningful participation.

Question 2

What are the different categories of AIFs?

Accepted Answer

SEBI classifies AIFs into three categories: Category I includes funds with positive spillover effects (Venture Capital, Angel, Infrastructure, Social Venture Funds). Category II covers Private Equity and Debt Funds that don't fall into other categories. Category III includes Hedge Funds and PIPE funds that employ complex trading strategies for short-term returns.

Question 3

How are AIFs different from Mutual Funds?

Accepted Answer

AIFs are privately pooled investments for HNIs with minimum ₹1 Crore investment, while mutual funds accept investments as low as ₹500. AIFs use complex strategies, have longer lock-in periods (typically 3+ years), and invest in alternative assets like private equity and startups. Mutual funds are more liquid, transparent, and suitable for retail investors.

Question 4

What is the lock-in period for AIFs?

Accepted Answer

Category I and II AIFs (close-ended) typically have a minimum lock-in of 3 years, with some PE funds extending to 4-7 years. Angel Funds have a 1-year lock-in. Category III funds may offer more flexibility. The lock-in ensures fund managers can execute long-term strategies without redemption pressure.

Question 5

What are the risks of investing in AIFs?

Accepted Answer

AIFs carry higher risks including: complex strategies that are harder to understand, investments in unlisted companies with limited liquidity, longer lock-in periods restricting exit options, higher fees (management + performance), and potential for significant capital loss. AIFs are suitable only for sophisticated investors with high risk tolerance.

Question 6

How are AIF returns taxed?

Accepted Answer

AIF taxation depends on the category: Category I & II AIFs have pass-through status—gains are taxed in investors' hands based on the nature of income (capital gains, dividends, interest). Category III AIFs are taxed at the fund level at maximum marginal rates. Consult our tax experts for personalized advice.

Question 7

Who should invest in AIFs?

Accepted Answer

AIFs are designed for High Net-worth Individuals (HNIs), Ultra HNIs, and institutional investors who have: minimum ₹1 Crore investable surplus, long-term investment horizon (5+ years), high risk tolerance, understanding of alternative investments, and desire for portfolio diversification beyond traditional assets.

Question 8

How do I choose the right AIF?

Accepted Answer

Evaluate the fund manager's track record, investment strategy alignment with your goals, historical performance across market cycles, fee structure (management + performance fees), portfolio composition, and risk metrics. We provide comprehensive due diligence reports and help you select AIFs matching your investment profile.

Alternative Investment Funds

AIF Investment Categories

Venture Capital Funds (Category I)

Angel Funds (Category I)

Infrastructure Funds (Category I)

Private Equity Funds (Category II)

Debt Funds (Category II)

Hedge Funds (Category III)

Ready to get started?

Frequently Asked Questions

Experience the impact of expert guidance