Basics of AIFs

Know your alternative edge. Alternative Investment Funds are pooled vehicles for strategies that mutual funds cannot run — with a minimum commitment of ₹1 crore.

The three categories

Category I funds back start-ups, SMEs and infrastructure. Category II covers private equity, private credit and real estate funds. Category III runs hedge-fund-style strategies, including leverage and derivatives.

Who these are actually for

The regulatory minimum commitment is ₹1 crore, and capital is typically locked for several years. AIFs suit investors whose core portfolio is already built and who can genuinely do without this money for the term.

Fees change the outcome

Management fees, performance fees and hurdle rates materially affect what reaches you. Model the net figure, not the gross one — the difference over a seven-year term is rarely small.

The risk position

AIFs are high-risk, illiquid and market-linked. There is no assured return, no guaranteed capital protection and often no secondary market if you change your mind.

Before you decide

Everything above is general. What is right for you depends on what you are protecting, what you already hold, and what you can sustain. That is a fifteen-minute conversation, and it is free.