Alternative Investment Funds (AIFs) are privately pooled investment vehicles regulated by SEBI and classified into Category I, II, and III. Unlike mutual funds, AIFs invest in non-traditional assets such as start-ups, SMEs, infrastructure projects, private equity, venture capital, or hedge funds, often involving listed or unlisted derivatives. The minimum ticket size is Rs. 1 crore, making them suitable mainly for high-net-worth individuals (HNIs).
AIFs provide diversification and flexibility, with access to investment avenues not available to retail investors. They raise capital from resident investors, NRIs, or foreign investors and channel it into alternative assets. While potential returns may be significant, risks are equally high, and investments may involve long lock-in periods.
In short, AIFs are best for HNIs who have large sums to invest, can bear high risk, and are comfortable with illiquid, long-term commitments.
