Alternative investment funds (AIFs)

• Category I: venture capital, SME, social-impact and infrastructure funds.
• Category II: private equity, private credit and real-estate funds. The largest category.
• Category III: hedge-fund-style strategies such as long-short equity, which can be open-ended and use leverage within limits.

Most Category I and II funds work on commitments: you commit an amount, say ₹1 crore, and the fund draws it down over two to four years as it finds investments, then returns money as it exits them. Your money can be tied up for 6 to 10 years.

• Investors who can commit at least ₹1 crore (₹25 lakh for the fund's own employees and directors; SEBI-accredited investors can go lower).
• Money you will not need for the fund's whole life.
• Portfolios already well diversified in listed markets.

Typically a management fee of 1.5–2.5% a year on committed or invested capital and a share of profits (often 10–20%) above a hurdle rate, plus set-up and operating expenses. Since 2023 SEBI requires AIFs to offer a direct plan without a distribution fee; through us, the fund pays a distribution fee, and we tell you how much before you invest.

• Category I and II are pass-through: income is taxed in your hands as if you earned it directly (capital gains, interest, dividends), except business income, which the fund pays.
• Category III is taxed at the fund level, often at the highest rate, so returns are reported after tax.

• Illiquidity: you usually cannot exit early, and secondary sales are rare and at a discount.
• Valuation: holdings are valued periodically, not daily, so reported returns can look smoother than reality.
• Manager and strategy risk, and outcomes that can be negative.

We compare managers on their earlier funds' realised returns, not just paper gains, and on fees, strategy and fit with your portfolio. We handle the paperwork and track capital calls, distributions and reports over the fund's life.

1. Your goals and liquidity needsHow much can be locked up, and for how long.
2. A short list of fundsCompared on track record, fees and strategy.
3. DocumentsPrivate placement memorandum, contribution agreement and KYC.
4. TrackingCapital calls, distributions and reports over the fund's life.