Alternative Investment Funds or AIFs are very unique and differentiated investment products. These funds invest in different asset classes such as real estate, private equity, commodities, startups etc. Investment in AIFs are done mostly by HNIs, NRIs, and corporates as the minimum ticket size is Rs. 1 crore.
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What are the types of AIFs?
There are 3 categories of AIFs which are further subdivided into different asset classes:
CATEGORY-1 AIFs
1. Venture capital funds - Invest in startups and hence the risk and potential rewards are very high
2. Angel funds - Invest in startups but they also bring in early management experience. Minimum ticket size to invest in these funds is Rs. 25 Lacs.
3. Infrastructure funds - Invest in infrastructure assets or companies and hence a good option for the investors looking to take exposure to the infrastructure sector.
4. Social venture funds - Invest in socially responsible businesses but with the aim of generating decent returns
CATEGORY-2 AIFs
1. Private equity funds - Invest in unlisted private companies. These investments are typically late rounds of startups and hence less riskier than venture capital or angel funds.
2. Debt funds - Invest in debt of unlisted companies. Good alternative for people seeking higher yields than other fixed income instruments.
3. Fund of funds - These funds invest in different AIFs and do not have their own investment portfolio
CATEGORY-3 AIFs
1. PIPE fund - Invest in shares of publicly traded companies at a discounted price.
2. Hedge funds - Invest in domestic and international equities using different strategies. These funds are highly aggressive and generally do both long and short. They also use derivatives and leveraged bets.
Who should invest in AIFs?
People looking to diversify their investments from traditional instruments
People looking to add specific exposures to their portfolio such as startups or real estate
People looking to earn high returns
People have high net worth as the minimum ticket size is very high
Why do you need retirement planning?
