What is an Alternative Investment Fund (AIF)?
An AIF is a privately pooled investment vehicle registered with SEBI that raises capital from sophisticated investors to invest per a defined strategy — from venture capital and private equity to long-short public-market funds.
Who can invest in an AIF in India?
AIFs are meant for high-net-worth and institutional investors. The general minimum commitment is ₹1 crore per investor (₹25 lakh for the fund's own directors and employees). Accredited Investors can access certain schemes at lower minimums.
What are the three SEBI AIF categories?
Category I — Funds SEBI encourages for their economic impact — venture capital, SME, social-impact and infrastructure funds. Close-ended; generally no leverage. Category II — The residual close-ended category — private equity, private credit and real-estate funds that don't use leverage except for day-to-day needs. The largest AIF category by AUM. Category III — Funds that use complex or leveraged strategies, often open-ended — long-short equity, hedge-fund-style and quant funds. Can employ leverage within SEBI limits.
What is the minimum investment in an AIF?
The SEBI minimum commitment is ₹1 crore for most investors; the fund's own directors, employees and fund managers may invest from ₹25 lakh. Accredited Investors may access lower minimums on eligible schemes.
How do AIF fees work (hurdle, catch-up, carry)?
Managers charge a fixed management fee plus a share of profits (carried interest). Investors usually receive a hurdle — a minimum return — before any carry is paid; a catch-up then lets the manager reach their agreed profit share, and the remainder is split. The manager's share of the fund's profits (the 'carry', typically 20%) earned only after the hurdle is met — the performance-linked part of AIF economics.
How are AIFs taxed in India?
For Category I & II AIFs, income (other than business income) is taxed in the investors' hands rather than at the fund level — the fund is a tax pass-through.
What is a GIFT City AIF?
An IFSC (GIFT City) feeder vehicle through which NRIs and foreign investors route capital into the fund, often with a distinct tax and regulatory treatment.
