Alternative Investment Funds

The tax treatment of AIFs varies based on the category of the fund. Category I and II AIFs are pass-through vehicles where income is taxed in the hands of investors. Category III AIFs are taxed at the fund level, and investors are not directly taxed on the fund’s income.

Yes, AIFs are regulated by the Securities and Exchange Board of India (SEBI). They operate under a regulatory framework designed to protect investors’ interests and ensure transparency in operations.

AIFs come in various forms, each designed to meet different investment objectives. Here’s a brief overview of some key AIF types

• Performing Credit AIFs
  Focus on secured lending and investing in performing credit assets, offering steady returns by targeting companies with strong credit profiles.
• Real Estate AIFs
  Focus on investments in real estate projects or companies, offering opportunities for capital appreciation and rental income.
• Pre-IPO AIFs
  Invest in companies that are expected to go public soon, offering early access to potentially high-growth opportunities.
• Private Equity AIFs
  Invest in private companies, providing capital for growth, buyouts, or restructuring, with the aim of realising significant returns upon exit.
• Venture Capital AIFs
  Focus on investing in companies that are not yet listed on any stock exchange, often in niche or emerging sectors.
• Special Situations AIFs
  Target unique opportunities arising from corporate restructurings, distressed assets, or other atypical situations, aiming for significant returns by capitalising on market inefficiencies.
• Equity AIFs
  Invest primarily in listed equity shares, targeting capital appreciation over the long term.
• Multi-Cap AIFs
  Invest across companies of varying market capitalisations—large-cap, mid-cap, and small-cap—providing a diversified equity portfolio that balances growth and stability.
• Multi-Asset AIFs
  Allocate investments across various asset classes such as equity, debt, and real estate, offering diversification and balanced risk-adjusted returns.
• Hedge Funds AIFs
  Employ advanced investment strategies, including leveraging, short-selling, and derivatives trading, to generate high returns across different market conditions.
• Fixed Income AIFs
  Focused on generating steady returns through investments in bonds, debentures, and other debt instruments.

Yes, AIFs typically have a lock-in period that varies depending on the specific fund. This period is designed to match the investment horizon of the underlying assets and strategies. Investors should carefully consider the lock-in period before investing.