AIFs are divided into three broad categories
TYPE
Criteria
Type of Funds
Cons
Taxation
CATEGORY I
* Infra, Social, Non-banked Credit for SME
* Special incentives provided by the government
* Invest in start ups or early stage ventures or social ventures
* Socially or economically desirable areas
* Special incentives provided by the government
* Invest in start ups or early stage ventures or social ventures
* Socially or economically desirable areas
* Venture Capital Funds
* SME Funds
* Social Venture Funds
* Infrastructure Funds
* Close ended
* Not allowed to leverage
* Specific Investment restrictions for each sub type
* Pass through
CATEGORY II
* Residual category of funds, invested primarily in unlisted securities
Private Equity Funds
* Debt Funds
* Funds of Funds
* Other Funds (like Real Estate funds) not classified under the other two categories
* Debt Funds
* Funds of Funds
* Other Funds (like Real Estate funds) not classified under the other two categories
* Closed ended
* Not allowed to leverage
* No restrictions on asset allocation
* Pass through
CATEGORY III
* Funds which are liquid / listed equities
* Funds which may invest in derivatives
* Funds which employ leverage for investments
* Long Only Equity Funds
* Long Short Equity Funds
* Open or close ended
* Leveraging is allowed up to 2x
* No restrictions on asset allocation
* Leveraging is allowed up to 2x
* No restrictions on asset allocation
* Fund level
Alternative Investment Funds or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.
Categories of Alternative Investment Funds [ AIFs ]
As per Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 Alternative Investment Funds shall seek registration in one of the three categories.
- Category I : Mainly invests in start- ups, SME's or any other sector which Govt. considers economically and socially viable.
- Category II : These include Alternative Investment Funds such as private equity funds or debt funds for which no specific incentives or concessions are given by the government or any other regulator.
- Category III : Alternative Investment Funds such as hedge funds or funds which trade with a view to make short term returns or such other funds which are open ended and for which no specific incentives or concessions are given by the government or any other regulator.
Tenure and Listing of Alternative Investment Funds / Schemes :
- For AIF scheme launched under Category I & II shall be close ended, the tenure shall be determined at the time of application and shall be for minimum three years.
- Category III Alternative Investment Fund may be open ended or close ended.
- Extension of the tenure of the close ended Alternative Investment Fund may be permitted up to two years subject to approval of two-thirds of the unit holders by value of their investment in the Alternative Investment Fund. In the absence of consent of unit holders, the Alternative Investment Fund shall fully liquidate within one year following expiration of the fund tenure or extended tenure.
- Units of close ended Alternative Investment Fund may be listed on stock exchange subject to a minimum tradable lot of one crore rupees. Such listing shall be permitted only after final close of the fund or scheme. However, listing on stock Exchanges is purely voluntary.
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