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Alternate Investment Funds (AIFs) are non-conventional investment avenues. They comprise pooled investment funds which invest in venture capital, private equity, hedge funds, etc. AIFs can establish themselves in the form of a company, trust, LLP, or body corporate. There is a separate set of regulations that deal with AIFs. Major regulation pertaining to AIFs is the Securities Exchange Board of India (Alternate Investment Funds) Regulations, 2012. This regulation prescribes three categories of AIFs, namely:Category ICategory II, andCategory III.
These categories further cover different types of investments. In this blog, we will specifically discuss Category I AIF investments.
As per the SEBI (AIF) Regulations, 2012, Category I AIF covers investments in Start-ups, early-stage ventures, SMEs, or social ventures or infrastructure or other sectors that are socially or economically viable as per the government and regulatory body. These investments have high growth potential. The Government and the regulators provide incentives and concessions to Category I AIF as they have a compounding effect in terms of growth and job creation. When Category I AIF came into effect, it served as a lifesaver for the already existing start-ups starving for capital.
Category I AIF investments are of the following types:
Let’s discuss each type of Category I AIF investment in detail:
AIFs provide greater return, flexibility and scope as compared to conventional assets. Talking about Category I AIFs, are strategic investments in start-ups, early-stage ventures, social ventures, socially and economically viable sectors, etc. This kind of investment makes diversification easier due to the market strategies and investment styles and reduces the volatility due to their non-dependency on stock market fluctuations thus having a strong potential for growth.
Also Read:Categories of Alternative Investment Funds
Ankita is an Advocate and has joined Enterslice as a Legal Researcher. Her work focuses on General Civil and Commercial laws, Corporate Taxation Laws, Labour and Employment Laws and Dispute Resolution. She is a law graduate from School of Law, University of Petroleum and Energy Studies. Prior to joining Enterslice, Ankita has the experience of practicing law in Delhi and Odisha.
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