ALTERNATIVE INVESTMENT FUND (AIF)

 Alternative investment fund is a fund which establish in India in the form of

trust/company/body corporate
 AIF Collects funds from resident and non-resident investor and invest as per
investment policy for the benefits of investors.
 Such fund carry out the function of fund management and it is registered with
SEBI.
 However following shall not be consider as AIF,
1. Family Trust
2. Employee Welfare Trust
3. ESOP Trust
4. Holding Company

INVESTMENT PATTERN OF AIF

 AIF can raised funds from resident and non-resident investor by issuing units
 Minimum value of each scheme AIF is equal to Rs.20crore.
 Minimum investment by each investor in AIF is equal to Rs.1Crore
 Minimum Investment by Director/Employee Of AIF/Managers/Sponsors Is
equal to Rs.25 Lakhs
 Minimum investment by managers and sponsors in category 1 and 2 is 2.5% of
total fund or 5crore which ever less and for category 3 is 5 % of total fund or
10crore which ever less
 Minimum investors in AIF Is equal to 1000(One Thousand)
 AIF shall raise funds by private placement basis
 Amount invested by managers and sponsors need to be discloses in placement
memorandum
 AIF can invest in securities in foreign company with subject to prior approval
from RBI/SEBI.
 Category 1 and 2 can’t make invest more than 25% of total fund in one venture
capital unit(investee company)
 AIF can’t make investment in associate company except 75% approval from
investor by value
 Uninvest amount can be invested in bank deposit/mutual fund or any other
money market instruments
 If total fund of AIF is more than 500crore then AIF need to be appoint
custodian who registered with SEBI
 AIF need to inform to SEBI for any changes in the sponsors/managers

CATEGORIES OF AIF.
Category 1
Such AIF invest in start up or early stage company, it includes venture capital
fund, infrastructure fund, Sme fund, social venture fund.
Category 2
Such AIF invest in own fund not borrowed fund. It includes debt fund and private
equity fund.

Category 3
Such AIF invest in both own fund as well as borrowed fund. It includes hedge
fund.

IMPORTANTS MEANING

Debt fund
Such fund investing in debentures and other securities of listed company and
unlisted company.
Hedge Fund
Such fund invest in both spot and future market and follows complex investment
strategies in order to diverse and reduce the risk and adopt the technique of
hedging

Infrastructure fund
Such fund invest in securities of company engaged in infrastructure sector.