Alternative investment fund

Alternative investment fund, commonly called as an AIF, refers to pooled investment funds which invest in venture capital, private equity, hedge funds, managed futures, etc. Simply put, an AIF means an investment which differs from conventional asset classes including stocks, debt securities, etc. An alternative investment fund can be established in the form of a company or a corporate body or a trust or LLP. More often than not, high net worth individuals/ultra-high net worth individuals invest in alternative investment funds. This is because it requires a high investment amount, unlike MFs (mutual funds).

According to Securities and Exchange Board of India (SEBI), AIFs can be divided into 3 categories:

Category I: Under this category, funds which make investment in start-ups, small and medium enterprises (SMEs) and new businesses having significant growth potential are considered. Government promotes investment in such projects since these can have a multiplier effect on economy in terms of economic growth and employment levels. Such funds act as a lifeline to those start-ups which are looking for capital. In this category, fund include venture capital fund, infrastructure fund, angel fund and social venture fund.

Category II: In this category, funds making investments in several equity securities and debt securities are considered. Simply put, those funds which are not included in category I and III by the regulator, are included in category II. No incentive is provided by government on investment in such funds. Private equity (PE) fund, debt fund, fund of funds are the ones included in this category.

Category III: Under this category, funds targeting short-term returns are considered. Individuals managing such funds use complex and diverse trading strategies to meet their goal of short-term capital appreciation. In these funds too, no specific incentive is provided by government on investment. Under category III, hedge fund and private investment in public equity fund are considered.

alternative investment fund
Which type of investor prefer alternative investment fund?

Any investor whether Indian, foreign or NRI is allowed to make investment in an AIF. However, they need to have required funds for making investment, and they should be willing to invest in unlisted and illiquid securities.

High net worth individuals (HNIs) and ultra-high net worth individuals who plan to expand their investment portfolio should consider making investment in AIFs. This is because the return potential is significantly high. However, these investments are accompanied by an equivalent amount of risk. AIFs make investment in those securities which go beyond the traditional means of investments including stocks, bonds, mutual funds, etc. With the help of these investments, investors have the opportunity to add alternative securities in their portfolio. Investments in AIFs can be considered by high-net-worth individuals, retail investors, and individuals. Such investors are required to be aware that they cannot be bought and sold easily.

Such investments are also considered by individuals who plan to diversify their exposure. AIF is a good option for diversification. Performance of AIFs is not dependent on performance of stock market. With investments in AIF, a portfolio becomes less volatile.

How VSRK Capital can help?

VSRK Capital is empanelled with certain renowned third-party AIF providers. We help our investors diversify their portfolio and reduce risk, while making sure that strong returns are not compromised. We understand the impacts of market volatility. Since most of the alternative investments are less volatile in comparison to stocks, VSRK Capital can help in choosing appropriate investment vehicle for investors who look for portfolio stability.

While traditional investments can offer sound returns over the long-term, AIFs can offer extra-ordinary returns. Therefore, we assure that our clients do not miss this opportunity.

Reach out to us now!!

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