LEARN · AIFs
LEARN · AIFs
An Alternative Investment Fund is a privately pooled, SEBI-registered vehicle that invests in assets beyond listed equity and plain debt — private equity, venture capital, private credit, real estate and hedge-style strategies. The SEBI minimum is ₹1 crore. AIFs are built for sophisticated, long-horizon investors and are typically used as a satellite, not a core, allocation.
You commit capital (₹1 Cr+) — it isn't all invested upfront.
The fund calls capital in tranches as opportunities arise.
The manager (GP) invests into private assets and manages them.
Returns come via exits / maturities; the fund winds down at end of tenure.
VC, angel, SME, infrastructure and social-venture funds — economically desirable, sometimes incentivised. Close-ended.
PE, private credit / debt, real estate and fund-of-funds. The largest category (~78%); no leverage beyond operational needs. Close-ended.
Hedge-fund-style, long-short and public-market strategies; may use leverage and derivatives. Often open-ended.
The total capital you agree to invest over the fund's life.
When the fund calls portions of your commitment to deploy.
Committed capital that hasn't yet been drawn or deployed.
IRR is the annualised return; MOIC the multiple of invested capital.
The GP's performance share (carry) earned above a hurdle rate.
The manager's own capital in the fund — "skin in the game."
Cat I and Cat II are typically close-ended with a fixed tenure (often 5–10 years) and a J-curve — early fees and drawdowns weigh on returns before exits deliver gains. Cat III is often open-ended. Capital is called over a commitment period, deployed, then harvested toward the fund's wind-down.
| Category | Tax treatment |
|---|---|
| Category I & II | Tax pass-through — income (other than business income) is taxed directly in the investor's hands, as if invested directly. |
| Category III | Taxed at the fund level; investors receive distributions post-tax. |
A ₹1 Cr+ product for UHNI / sophisticated investors with a long horizon and tolerance for illiquidity and complexity — sized as a satellite allocation, not the core.
₹1 Cr is the standard minimum. Angel funds start at ₹25 lakh, and the manager's own employees / directors may invest at ₹25 lakh.
Up to 1,000 investors per scheme (Angel funds: up to 200). Each scheme needs a minimum corpus of ₹20 Cr (₹5 Cr for Angel funds).
Cash returns in order: return of capital → hurdle → GP catch-up → carry split (commonly ~80:20 above the hurdle).
If early gains later reverse, excess carry paid to the GP can be clawed back to investors at wind-down — a key alignment protection.
Some GPs offer direct co-investment alongside the fund in select deals, often at reduced or nil fees — extra exposure to the best opportunities.
IFSC-domiciled funds for NRIs / foreign investors and outbound global exposure, with tax and FEMA advantages over the onshore route.