The full form of AIF is Alternative Investment Funds. It refers to those funds that are created in India as a privately pooled investment to collect funds from a specific investor, depending on a previously defined investment policy. Moreover, these funds are then invested depending on the policies and regulations of the AIF. Interestingly, AIF does not constitute funds that are covered under the SEBI Regulations, 1996 and SEBI Regulations, 1999.
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What are the 3 Categories of AIF?
The Securities and Exchange Board of India classifies Alternative Investment Funds into three broad categories:
- Category I AIF
- Category II AIF
- Category III AIF
As you might have already guessed, each category looks after different investments. Wondering what is an example of AIF? Well, AIFs generally include such as hedge funds, angel funds, private equity, venture capital, and so on.
What is the Minimum Amount in AIF?
The minimum investment amount in AIF is rupees 1 crore for investors. On the other hand, the minimum amount for fund managers, employees, and directors is rupees 25 lakhs.
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Who is Eligible to Invest in AIF?
The eligibility criteria to invest in AIF look somewhat like this:
- Indian residents, NRIs, and foreign nationalists are eligible to invest in AIFs.
- The minimum investment limit for them is rupees 1 crore.
- AIFs have a lock-in period of a minimum of three years.
Benefits of Investing in AIFs
Here are a few essential benefits of investing in AIFs:
- In most cases, AIFs offer a generally higher return potential than other similar investment options.
- They can be a great option to invest in during a financial crisis or market volatility.
- Since AIFs are not directly related to stock markets like other conventional alternatives, they come with low volatility.
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