Alternative Investment Fund
Aspiring fund managers can leverage our end-to-end solutions to establish and operate Alternative Investment Funds, from SEBI registration and structuring to operational setup and ongoing compliance.
Introduction & Regulatory Background
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SEBI (Alternative Investment Funds) Regulations, 2012 regulates various types of private pool of capital or investment vehicles so as to channelize and regulate the funds where institutions or HNIs can invest.
These investment vehicles are called Alternative Investment Funds (AIFs) and represent a sophisticated asset class tailored for institutional investors and high net-worth individuals.
Entity Requirement: An AIF can be setup in any of the 3 types viz. Trust, Company, or Limited Liability Partnership (LLP).
Categories of AIF
Category I
Funds with positive spill-over effects on the economy (VCFs, SME Funds, Social Venture Funds, Infrastructure Funds). Incentives or concessions might be considered by GOI.
Category II
AIFs that are not Category I or Category III. This is the catch-all category for most private equity and debt funds that do not undertake leverage.
Category III
Hedge funds and public market funds that take leverage or execute transactions under complex trading strategies.
Eligibility & Investment Conditions
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Minimum 1 Crore
Each investor in an AIF has to invest a minimum amount of Rs. 1 crore, as per SEBI regulations.
Below ₹1 Crore
Accredited Investor, Employees, Directors of AIFs, Employee and Director of Manager can invest a lower minimum threshold.
Sponsor Continuing Interest
Category I & II
2.5% of corpus or Rs. 5 Crores*
Category III
5% of corpus or Rs. 10 Crores*
Key Regulatory Conditions
Scheme Launch & PPM
An AIF launches schemes after filing Private Placement Memorandum SEBI.
PPM contains necessary information for prospective investors to decide wisely.
Any subsequent material change in PPM requires prior SEBI approval.
Fund Tenure & Liquidity
Category I & II AIFs can be only close ended with a minimum tenure of 3 years.
Category III AIFs can be either open ended or close ended.
Angel Funds have tenure relaxations but stricter investor eligibility criteria.
FDI & Overseas Investment
100% Foreign Direct Investment permitted under automatic route for AIFs.
AIFs can invest overseas subject to compliance with SEBI and RBI guidelines.
Qualified Institutional Buyer (QIB) status is granted to all AIFs subject to concentration limits.
How SecMark Assists
Advising on the optimal legal structure (company, trust, or LLP) aligned with business requirements and tax considerations.
Guiding entity setup, sponsor obligations, investment management roles and team eligibility for SEBI registration.
Coordinating with trustees, registrars, custodians, Merchant Banker and auditors to ensure regulatory readiness.
Preparing the Private Placement Memorandum (PPM), Contribution Agreements and Investment Management Agreements.
Managing the end-to-end SEBI application process, including Form A filing and regulatory correspondence until registration.
Designing SEBI-compliant internal policies, procedures and operational frameworks.
Supporting operational setup and outsourcing non-critical functions such as accounting and regulatory filings.
