An Alternative Investment Fund (AIF) is a privately pooled investment vehicle that invests in non-traditional asset classes like private equity, hedge funds, real estate, startups, and infrastructure.
Alternative Investment Funds (AIFs) are designed for sophisticated investors who are willing to take higher risk for potentially higher returns. Unlike mutual funds, AIFs do not invest mainly in listed stocks or bonds. Instead, they focus on alternative assets such as unlisted companies, venture capital, private equity, hedge strategies, and real assets.
In India, AIFs are regulated by the Securities and Exchange Board of India (SEBI) and are classified into three categories based on their investment strategy and risk profile. These funds usually require a high minimum investment amount, making them suitable for high-net-worth individuals (HNIs) and institutional investors.
AIFs offer portfolio diversification and access to unique investment opportunities but may involve lower liquidity, longer lock-in periods, and higher risk compared to traditional investments.
"A venture capital fund that invests in early-stage startups or a private equity fund investing in unlisted companies is an example of an Alternative Investment Fund."