Alternative Investment Funds (AIFs) In India
The Sebi Alternative Investment Fund (AIF) is a fund that can be launched by an Alternative Investment Fund Manager (AIFM) to raise capital from investors. The fund will invest in other funds, which are registered with SEBI. These include hedge funds, private equity, and venture capital funds.
The AIF can be set up by any person who has been granted registration by SEBI as an AIFM. SEBI has issued a notification on the guidelines for setting up an AIF and norms for investing in it. An AIFM is required to obtain prior approval from SEBI before launching an AIF.
Categories Of Alternate Investment Fund
The investment objective of an AIF is to generate returns primarily through investments in other alternative investment funds that invest in emerging markets such as private equity, hedge funds, and venture capital funds.
Category I AIF: The Category I AIF is a Collective Investment Scheme (CIS) that is registered with SEBI and can be marketed in India. It is subject to the provisions of the Securities and Exchange Board of India Act, 1992, as amended from time to time (SEBI Act), and other relevant laws. The Category I AIFs are similar to mutual funds in the sense that they offer investors an opportunity to pool money together into a fund that invests in securities. However, unlike mutual funds, they are not listed on any stock exchange. They are generally structured as closed-ended schemes where subscriptions are made at fixed intervals and redemptions are also done at pre-determined intervals.
Category II AIF: The Category II AIF is registered with SEBI but its units cannot be marketed in India. This category of investment funds is usually set up for foreign investors who look at India as an emerging market for investment purposes. The Category II AIFs are usually structured as open-ended schemes where subscriptions and redemptions may be made at any time during their tenure.
Category III AIF: The Category III AIF is a CIS that has been registered with SEBI but no units can be marketed in India. Category III AIFs are not permitted to market their products directly to retail investors. However, they may be marketed indirectly through distributors or advisers registered with SEBI (Securities & Exchange Board of India).
Documents Required For Alternate Investment Fund Registration:
Application Form: The application form for registration of an AIF has to be submitted online through SEBI's website www.sebi.gov.in. The applicant must complete all columns of the Application Form and upload the required documents (listed below).
A copy of Memorandum & Articles of Association of the company or LLP/LLP, where AIF is proposed to be incorporated
A copy of Certificate of Incorporation or Registration of Company/LLP duly certified by Registrar of Companies/Partnership State/Chambers of Commerce & Industry/Federation or similar authorities in case no such certificate is available with the applicant
A copy of the resolution passed by the Board approving registration of AIF, certified by Secretary and Managing Director or Founder Member(s)/Partner(s) along with their signatures duly attested by Commissioner for Oaths
