- connect@rightanglewealth.com
- +91 98255 00130
What is an AIF?
(Alternative Investment Fund — India’s advanced private capital vehicle)
At its core: An AIF is a privately pooled investment vehicle, established in India (as a trust, company, LLP, or body corporate), which collects capital from select qualified investors and invests it in accordance with a clearly defined investment strategy. It is regulated under SEBI’s AIF Regulations, 2012.
(Adheres to SEBI oversight — unlike an unregulated pool)
Key Features & Essentials
| Feature | Details & Implication |
|---|---|
| Investor class | Only “qualified / sophisticated” investors (HNIs, institutions, Accredited) — not retail public. |
| Minimum corpus & commitment | Funds must have a minimum capital Rs.1cr as prescribed by SEBI. |
| Lock-in, liquidity & structure | Both Open & closed-ended; Category 1 & 2 lock-in periods apply; redemption windows allowed Category 3. |
| Leverage & borrowing | Rules vary by category: some allow limited leverage; others permit more aggressive borrowing. |
| Exposure limits | To prevent concentration, limits exist on exposure to single investee, co-investment norms, etc. |
| Tax treatment | Category 1 and 2 Follows pass through structures; In category 3, taxation happens at the fund level. |
| Disclosure & governance | Mandatory offering documents, periodic reporting, valuation protocols, conflict of interest norms, etc. |
How These Categories Differ (A Snapshot)
| Dimension | Category I | Category II | Category III |
|---|---|---|---|
| Leverage / Borrowing | Very restricted, only temporary | Disallowed (except limited operational borrowing) | Allowed (with appropriate disclosures and investor approval) |
| Investment tools | Primarily equity / debt in unlisted / infrastructure | Equity, debt in private / structured assets | Derivatives, shorting, listed & unlisted, structured products. |
| Liquidity | Low | Moderate | Higher (if open-ended) |
| Risk / Return Profile | High risk, high upside | Moderate-to-high | Volatile, high return potential |
| Tax Treatment | Generally pass-through (taxes on investor) | Generally pass-through | Fund-level taxation (capital gains, etc.) |
| Suitability | Long-term, patient capital | Balanced, growth + income | Tactical, active, nimble investors |