Pillar II · Invest

Alternative Investment Funds

Beyond mutual funds and direct equity — sophisticated, less-correlated strategies for investors with ₹1 crore+ to allocate to alternatives.

What it is

Sophisticated, Specialised, Selective

An AIF is a privately pooled investment vehicle, regulated by SEBI, which deploys capital into strategies typically unavailable in mutual funds — long-short equity, private credit, venture, real estate, and structured products.

AIFs come in three SEBI categories — each with a different risk-return profile, lock-in, and tax treatment. They’re a powerful diversifier when used in moderation alongside core MF and direct equity holdings.

We help you understand which category fits, evaluate fund managers and track records, and structure exposure within your overall asset allocation.

Who it's for

Accredited & Patient Capital

AIFs suit investors who:

  • Can commit ₹1 crore+ to a single fund (SEBI minimum)
  • Have liquid net worth significantly higher than the commitment
  • Are comfortable with 5–10 year illiquidity (especially Cat I & II)
  • Want diversification beyond listed equity and debt
  • Understand higher fees and lower transparency vs MF/PMS
SEBI Categories

Three Categories, Distinct Roles

Category I

Venture, Infra & SME Funds

Funds investing in early-stage ventures, infrastructure, or social impact. Long lock-ins (8–10 yrs), high return potential, high binary risk.

Category II

Private Equity, Credit & Real Estate

Closed-end PE and private credit funds. Yield-oriented or growth-oriented; typical lock-in 5–7 yrs.

Category III

Long-Short & Hedge Strategies

Open-ended funds using derivatives, leverage, and short-selling. Aim for absolute returns with lower correlation to equity markets.

FAQ

What Investors Ask

Cat I and II AIFs have pass-through status — gains taxed in the investor’s hands as per asset class. Cat III AIFs are taxed at the fund level (typically max marginal rate). Tax planning is critical here; we model post-tax outcomes upfront.
For diversification — AIFs can deliver returns less correlated with public markets.

For access — to opportunities (private credit, unlisted equity) you can’t reach via MF or PMS.

For risk-adjusted return — when chosen carefully.
2-and-20 is common — 2% management fee plus 20% performance fee above a hurdle (typically 8–10% IRR). Fees vary widely; we always lay out gross-vs-net IRR before recommending.
For most HNIs, 5–15% of investable net worth is a sensible band, spread across 2–4 strategies. Aggressive allocations require correspondingly large liquid reserves.
Worth Exploring

See If AIFs Fit Your Allocation

We’ll review your overall portfolio and help you decide whether — and how — to add AIF exposure.

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