Alternative Investment Funds (AIFs) have gained significant traction in India, offering investors a structured way to diversify their portfolios beyond traditional investment avenues like stocks and mutual funds. The Securities and Exchange Board of India (SEBI) regulates AIFs under the SEBI (Alternative Investment Funds) Regulations, 2012. Any entity seeking to operate as an AIF in India must obtain SEBI registration to ensure compliance with regulatory requirements and investor protection norms.
This article provides an in-depth analysis of AIF registration in India, covering its categories, eligibility criteria, registration process, compliance requirements, and key considerations for fund managers.
SEBI classifies AIFs into three broad categories based on their investment strategies:
These funds primarily invest in start-ups, Small and Medium Enterprises (SMEs), or sectors considered socially or economically desirable by the government. Examples include:
Category I AIFs often receive government incentives, such as tax benefits and financial assistance, to promote investment in priority sectors.
These funds do not receive specific government incentives and can invest in a wide range of assets, excluding leverage-based investments. Examples include:
These funds employ complex trading strategies, including leverage, to maximize returns. They typically invest in publicly traded securities and derivatives. Examples include: