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Alternative Investment Funds (AIF) in Category I and II can now borrow for operational flexibility, the Securities and Exchange Board of India (SEBI) said in a circular
Alternative Investment Funds (AIF)
An AIF refers to a fund established or formed in India, serving as a privately pooled investment mechanism.
It gathers funds from sophisticated investors, whether domestic or international, with the aim of investing according to a specific investment policy, ultimately benefiting its investors.
These investment vehicles adhere to the SEBI (Alternative Investment Funds) Regulations, 2012.
As of December, 2023, 1,220 AIFs were registered with the SEBI
SEBI has classified AIFs into three main categories:
Category I: AIFs that invest in startups, early-stage ventures, social initiatives, SMEs, infrastructure, or sectors deemed socially and economically beneficial by authorities.
This includes venture capital, social venture funds, infrastructure funds, and any other specified Alternative Investment Funds.
Category II: AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements.
These include real estate funds, private equity funds (PE funds), distressed asset funds, and similar types.
Category III: AIFs which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives.
Various types of funds such as hedge funds, PIPE (private investment in public equity) Funds, etc. are registered as Category III AIFs
Legal forms
An AIF can be established in the form of a trust or a company or a limited liability partnership or a body corporate.
Most of the AIFs registered with SEBI are in trust form.
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