ALTERNATIVE

ASSET
Name: Ashfaque Mehboob Khan
Roll no: A-17
Div:A
SEM-III
Prof.Nilesh Manore

Subject: Wealth Management

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 CONCEPT

 Alternate investments are those investments other than traditional asset class.
 Traditional asset class are stocks, bonds, cash etc.
 Alternative Investment may include a wide range of asset such as Real state,
Private Equity or Commodaties

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TYPES OF ALTERNATIVE ASSETS

TANGIBLE ASSETS FINANCIAL ASSETS

PRECIOUS METALS REAL ESTATE ( Direct real estate or REITS which
are publicly traded),

ARTWORK PRIVATE EQUITY

ANTIQUES COMMODITIES
COINS HEDGE FUNDS
STAMPS CRYPTO CURRENCIES (Digital currency like bit
coins), Art Funds, Wine Funds, Film funds

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FEATURES OF ALTERNATIVE ASSETS

 Mostly held by HNIs and Institutional investors

 High ticket size
 Complex nature of investments
 Lack of transparency
 Less stringent disclosure requirements
 Less liquidity ( takes time to sell off at fair price, urgent sales are generally at a loss)
 Requires more specialized knowledge
 Less historical data available

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WHY ALTERNATIVE INVESTMENTS?

 Low correlation with traditional asset class.

 Hence give benefit of risk diversification
( reduced risk)
 Can be used for strategic asset allocation.

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REGULATION IN INDIA
 SEBI AIF(Alternate Investment Funds)
Regulations, 2012 gives regulatory
framework for the AIF funds in India.

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REGULATION IN USA

 In USA Alternative Investments are privately pooled.

 They are not required to be licensed or registered.

 They are required to file appropriate organizational filing.

 They are regulated by SEC or State laws.

 Maximum beneficial owners are 100. No restrictions for number of investors.

 Fund size up to $150 million gives exemption for license/registration for private pooled and
managed funds

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 Alternative Investment Funds must be sold in the U.S. on a
private placement basis.
 The restriction on general solicitation and general advertising
applies to any person acting on behalf of a fund, including
any marketing or placement agent.
 The advertisement restriction is relaxed in 2016. They need
to file Form D with SEC 15 days before advertisement.

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 THE PRINCIPAL LEGAL STRUCTURES USED FOR
ALTERNATIVE INVESTMENT FUNDS?

 Privately offered alternative investment funds (“AIFs”) are

established in the United States (U.S.) pursuant to U.S. state
law. AIFs are most commonly organized under state law as a
limited partnership (“LP”) or a limited liability company
(“LLC”).
 In particular, sponsors primarily organize AIFs in the State of
Delaware because this jurisdiction is deemed by many
industry participants to have pro-management laws, a
sophisticated Court of Chancery with respect to corporate
matters, and a well-established related body of statutory and
case law.

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 GLOBAL ALTERNATIVE MARKET SIZE
Hedge funds Private Equity Others Total – Trillion $
DEC2017 3.6 3.1 2.1 8.8
14

Sept 2020 13 (12% of global

investments)
2023 ( projected in 4.7 4.9 4.4 14
2017)

Approx.10000 globally
active hedge funds in
Enactment of VCF Regulations, 1996

1996
DEVELOPMENT OF AIFS IN INDIA
2011
Concept paper for proposed AIF Regulations

2012

Enactment of AIF
Regulations, 2012

2013

Rules for Angel Fund

introduced

2014

2015

•FDI in AIF through

automatic route
•Material Changes in the
terms of AIF – Approval
of 75% of Investors
•Exit option to investors
dissenting for increase
in fees/ expenses
12/16/2023 11
 2016 •Relaxation of rules for
Angel funds.

•CAT III AIF permitted

to invest in commodities 2017
derivatives
•Online registration •Guidelines for AIF in
platform for AIFs 2018 IFSC introduced
introduced • Further relaxation of
rules for Angel funds.

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DATA RELATING TO ACTIVITIES OF ALTERNATIVE INVESTMENT FUNDS
(AIFS)(CUMULATIVE NET FIGURES AS AT THE END OF SEPTEMBER 30, 2021) RS. IN CRORES

Category of AIF Commitments Funds Investments

Raised Raised Made
Category I
Infrastructure Fund 11,852.40 8,620.59 7,693.51
Social Venture Fund 2,701.75 2,137.92 617.51
Venture Capital Fund 33,184.39 16,410.70 12,912.25
SME Fund 655.65 54.59 51.83
Category I Total 48,394.20 27,223.80 21,275.10
Category II 4,28,661.01 1,92,264.0 1,72,264.58
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Category III 57,952.74 50,356.10 50,867.01
Grand Total 5,35,007.95 2,69,843.9 2,44,406.70
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 30TH SEPT.20 FIGURES
ategory of AIF Commitments raised Funds raised Investments made

Category I
Infrastructure Fund 11898.19 8259 7156.51

Social Venture Fund 2448.41 1456.13 1097.2

Venture Capital Fund 26455.5 11040 8373

SME Fund 642.13 120.77 64.39

Category I Total 41444.23 20876 16691
Category II 314309 133815.3 112018.8
Category III 49364.34 42468.4 36963.44
Grand Total 405117.57 197159.7 165673.24

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AIF INITIAL GROWTH

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AIF LATEST FIGURES
 There are over 750 AIFs registered with the market regulator
SEBI.18-Jun-2021.
 Dec.2020 there were 683 registered AIFs

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REGULATORY PUSH BEHIND AIF GROWTH

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REASONS FOR GROWTH
 Changes in structure, clarity on tax issues among reasons for growing
investor interest
 Investment by alternative investment funds (AIFs) touched ₹2-lakh-crore
mark during January-March, rising more than 30 per cent over the year-
ago period despite the effect of the pandemic.
 According to latest data available with market regulator SEBI, the
cumulative net investments made by AIFs at the end of March 2021 stood
at ₹2-lakh crore against ₹1.53-lakh crore at the end of the previous fiscal.
 Commitments raised by AIF also jumped 22 per cent to ₹4.51-lakh crore
as of March 2021 from ₹3.69-lakh crore in the year-ago period, while
funds raised by AIF went up by 23 per cent to ₹2.30-lakh crore at the end
of FY21.
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LISTING
 Units of close ended Alternative Investment Fund may be
listed on stock exchange subject to a minimum tradable lot
of one crore rupees. Such listing shall be permitted only after
final close of the fund or scheme. However, listing on stock
Exchanges is purely voluntary.

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CAN NRIS, PIOS AND OCI INVEST IN AIFS?
 AIFs accept investments from all Indians, including NRIs,
PIOs, and OCIs by issuing units. The fund may have
restrictions in some geography as per the AMC compliance
policy.

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THANK YOU

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