AIF (Alternative Investment Fund)
Definition
A privately pooled investment vehicle registered with SEBI that collects funds from sophisticated investors for investing in non-traditional asset classes. AIFs are categorized into three types: Category I (venture capital, infrastructure, social ventures), Category II (private equity, debt funds), and Category III (hedge funds, complex trading strategies). Minimum investment is Rs 1 crore.
Why It Matters
AIFs provide HNIs access to asset classes unavailable through mutual funds — startup equity, structured credit, distressed debt, and hedge fund strategies. However, they are illiquid (3-7 year lock-in), opaque (limited NAV transparency), and carry higher risk. The Rs 1 crore minimum entry ensures only investors who can absorb potential losses participate.