Alternate Investment Funds

Alternate Investment Funds(AIFs) are funds that pool capital from investors, primarily HNIs and institutions, to invest in asset classes such as real estate, venture capital and private and public equity.

Over 300 such funds have been registered with SEBI since 2012 when the AIF guidelines were notified.

Under SEBI guidelines, AIFs operate in three categories.

  • Category I AIFs invest in start-up or early-stage ventures, SMEs, infrastructure or other areas which the government or regulators consider as economically desirable.
  • Category II AIF includes real estate funds, private equity funds, and funds for distressed assets. Such funds are prohibited from raising debt except for meeting day-to-day requirements.
  • Category III AIFs are those investing with a view to make short-term returns and include hedge funds and PIPE funds.

Recently, In a bid to boost the ailing real estate sector, which is sitting on a large inventory of unsold and incomplete projects, the Centre last week proposed to create a Category II Alternate Investment Fund (AIF) to provide last-mile funding to the sector. The Centre plans to invest 10,000 crores in the fund, while 15,000 crores will be pooled from domestic institutions such as LIC and other investors in a phased manner.

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