AIF Disclosures
Alternative Investment Funds (AIF) Disclosures
Alternative Investment Funds (AIF) are suitable ONLY for sophisticated, high-net-worth investors who have a minimum investable surplus of ₹1 Crore (Rupees One Crore), a high/aggressive risk tolerance, and the financial capacity to bear total illiquidity for 3 to 7 years or potential loss of capital. AIF investments carry high concentration, valuation, and market risks. Past performance does not guarantee future returns. Always read the complete Private Placement Memorandum (PPM) before investing.
1. What is an Alternative Investment Fund (AIF)?
An Alternative Investment Fund (AIF) is a privately pooled investment vehicle established or incorporated in India that collects funds from sophisticated domestic and international investors for investing in accordance with a defined investment policy under SEBI (AIF) Regulations, 2012.
Private Pooling
Capital pooled privately from a limited group of sophisticated investors (max 1,000 per scheme). Not open to general retail public.
₹1 Crore Minimum
SEBI mandates a strict minimum ticket size of ₹1 Crore per investor (₹25 Lakhs for fund employees/directors).
3 to 7 Year Lock-in
Typically closed-ended with multi-year tenure. Investors cannot redeem units on demand during the fund lifecycle.
Private Placement Memo
Governed by a comprehensive Private Placement Memorandum (PPM) rather than a public prospectus or KIM.
Alternative Assets
Invests in unlisted equities, private credit, structured debt, early-stage startups, real estate, and long-short strategies.
SEBI Regulated
All AIFs, fund managers, and trustees must be formally registered and audited under SEBI (AIF) Regulations, 2012.
2. The Three SEBI Categories of AIF
3. Investor Eligibility & Suitability Framework
- High Net Worth Individuals (HNIs) & Ultra-HNIs
- Family Offices, Corporate Treasuries & LLPs
- Non-Resident Indians (NRIs) & Foreign Nationals
- Minimum ₹1 Crore investable surplus in alternative assets
- Documented 'Aggressive' investor risk profile
- Liquidity horizon of 5 to 7+ years without cash-flow reliance
- Retail investors or portfolios under ₹1 Crore surplus
- Conservative, Moderate, or Balanced risk profile investors
- Investors requiring liquidity or regular income within 5 years
- Capital earmarked for emergency funds, education, or retirement living
- Investors unable to absorb substantial capital fluctuations
4. AIF vs Mutual Funds vs PMS — Key Distinctions
| Parameter | Mutual Fund | PMS (Portfolio Mgmt) | AIF (Alternative Fund) |
|---|---|---|---|
| Minimum Investment | ₹500 (SIP) / ₹5,000 (Lump sum) | ₹50 Lakhs (SEBI Mandated) | ₹1 Crore (SEBI Mandated) |
| Primary Regulatory Body | SEBI / AMFI | SEBI / APMI | SEBI (AIF Regulations 2012) |
| Liquidity & Redemptions | Daily (T+1 / T+2 days) | Moderate (Securities sale) | Illiquid (3 – 7 Yr Lock-in) |
| Target Investor Profile | Retail, HNI & Institutional | High Net Worth (₹50L+) | Sophisticated / UHNIs (₹1Cr+) |
| Asset Ownership | Units in collective scheme | Direct stocks in client Demat | Units in private pooled trust |
| Reporting Frequency | Daily NAV & Monthly CAS | Monthly Portfolio Reports | Quarterly / Semi-Annual Reports |
| Permitted Asset Classes | Listed equities, bonds, gold | Listed equities & debt | Unlisted equity, PE, Real Estate, Long-Short |
| Governing Document | SID, SAI & KIM | PMS Disclosure Document | Private Placement Memorandum (PPM) |
5. Key Risk Disclosures — Per SEBI (AIF) Regulations
Illiquidity Risk
Capital is committed for 3 to 7 years. Secondary market exits are limited and redemptions prior to maturity are generally not permitted.
Capital Loss Risk
Unlike fixed income or retail mutual funds, unlisted equity and private debt involve severe credit, execution, and loss-of-capital risks.
Concentration Risk
AIF portfolios hold a compact basket of 10–25 holdings. Underperformance in one or two deals can substantially impact net fund returns.
Valuation Risk
Unlisted securities are marked to valuation periodically by independent valuers. Realized exit proceeds may differ from interim NAV estimates.
Leverage Risk (Cat III)
Category III AIFs utilize derivative positions and leverage which amplify both portfolio upside and downside volatility.
Exit Horizon Risk
Realization of proceeds is tied to external IPO windows, secondary stake sales, or strategic acquisitions which can face macro delays.
6. Typical AIF Fee & Cost Waterfall
| Fee Component | Standard Industry Range | Operational Description |
|---|---|---|
| Management Fee | 1.00% – 2.50% p.a. | Calculated on committed or drawn-down capital to cover investment team research and administration. |
| Performance Fee (Carry) | 15% – 20% Carry | Profit-sharing above a pre-agreed hurdle rate (typically 8%–12% IRR) with catch-up provisions. |
| Setup & Onboarding Fee | 0.50% – 2.00% (One-time) | Initial legal setup, PPM structuring, stamp duty, and onboarding overheads. |
| Operating & Custody Fees | Actuals (Passed through) | SEBI fees, statutory audit, independent valuation, trustee, and custodian charges. |
| Applicable GST | 18% GST | Statutory GST levied on management and performance fees as per Government of India norms. |
7. FINWISDOM's Role as AIF Distributor
- Distribution Intermediary: FINWISDOM acts strictly as a non-exclusive distributor and does not manage fund assets or dictate investment decisions.
- Manager Fiduciary: All investment and divestment decisions rest solely with the respective SEBI-registered AIF Manager.
- Remuneration Transparency: FINWISDOM receives distributor placement/trail remuneration from the AIF manager as disclosed in the PPM.
- Mandatory Risk Profiling: We solicit AIF products exclusively to clients classified as 'Aggressive' after documented risk assessments.
- Asset Allocation Cap: We recommend allocating no more than 10% – 20% of overall liquid net worth into illiquid alternative funds.
8. Empanelled AIF Partners (9 Funds)
| # | AIF Manager / Partner | SEBI Category | Minimum Investment | Status |
|---|---|---|---|---|
| 1 | Motilal Oswal Alternates | Cat II / III | ₹1 Crore | Empanelled |
| 2 | Nuvama Private Equity / Wealth | Cat II / III | ₹1 Crore | Empanelled |
| 3 | Wealth Company | Cat II / III | ₹1 Crore | Empanelled |
| 4 | Mosaic Capital | Cat II | ₹1 Crore | Empanelled |
| 5 | Aditya Birla Sun Life AIF | Cat II / III | ₹1 Crore | Empanelled |
| 6 | UTI Structured Debt / Alternates | Cat II | ₹1 Crore | Empanelled |
| 7 | ARCA Capital | Cat II | ₹1 Crore | Empanelled |
| 8 | Certus Capital | Cat II | ₹1 Crore | Empanelled |
| 9 | Finvolve Alternates | Cat I / II | ₹1 Crore | Empanelled |
9. Taxation Principles for AIF Investments
Under Section 115UB of the Income Tax Act, Category I and II AIFs enjoy tax pass-through status. Income generated by the fund is taxed directly in the hands of the investor based on their applicable tax bracket and holding period as if invested directly in underlying assets.
Category III AIFs do not enjoy pass-through status. Income and capital gains are computed and taxed at the fund level at applicable Maximum Marginal Rates (MMR). Distributed returns to investors are typically net of taxes paid at the AIF level.
Official Portals & Verification Resources
SEBI Registered AIFs
Verify SEBI registration status, category classification, and registered office of AIF managers.
sebi.gov.in → AIF Directory ↗SEBI AIF Regulations
Master circulars and regulatory guidelines governing Alternative Investment Funds in India.
sebi.gov.in → AIF Circulars ↗SEBI SCORES Portal
Lodge and track investor grievances against SEBI-registered AIF managers and distributors.
scores.sebi.gov.in ↗SMART ODR Platform
Online dispute resolution mechanism for conciliation and arbitration in the Indian securities market.
smartodr.in ↗Devansh S Mehta | Director & GRO
FINWISDOM FINANCIAL SERVICES PVT LTD (ARN-367223)
Email: devansh@finwisdom.co.in | Phone: 9920217997 | Grievance Portal ↗