Alternative Investment Funds

Alternative Investment Funds (AIFs) are privately pooled investment vehicles registered and regulated by Securities & exchange board of India(SEBI). These funds raise capital from sophisticated investors and deploy it according to a clearly defined strategy. As of 31 March 2025, AIFs had received commitments exceeding 13.49 lakh crore, growing at a five-year CAGR of over 25%, making them one of the fastest-growing investment avenues for Indian high-net-worth individuals, family offices, and institutions.

Investors are drawn to AIFs for several reasons. They offer access to a broader set of opportunities, including unlisted companies, pre-IPO deals, long-short strategies, real-asset credit, and special situations. Their custom-built structures provide benefits like hurdle rates, catch-up clauses, co-investment rights, and profit waterfalls. Managed by professional teams with backgrounds in private equity, venture capital, hedge funds, investment banking, and corporate finance, AIFs offer regulated yet flexible environments. They comply with SEBI’s rules for quarterly reporting, independent valuation, and auditing, while offering freedom for leverage (in Category III) or longer lock-ins (in Categories I and II), which support patient capital deployment. The scale of this market is evident from the 36% year-on-year rise in commitments.

Compared to PMS and mutual funds, AIFs are suited for larger-ticket investors (1 crore minimum, or 25 lakh for Angel Funds), use legal structures like trusts or LLPs, and often involve longer lock-ins. While mutual funds and PMS offer higher liquidity, AIFs serve as a bridge between public-market investments and direct private-equity participation, ideal for investors seeking structured, long-term strategies.

AIFs are classified into three categories. Category I focuses on sectors with positive externalities, such as startups, infrastructure, social impact, and SMEs, and does not permit leverage. Category II includes private equity, credit, distressed assets, and special situations, also without leverage except structurally. Category III involves complex listed-market strategies like long-short equity and global macros and can use leverage within regulatory limits.

Within Category III, listed-market strategies include long-only equity portfolios that aim for cyclical outperformance and long-short strategies that seek absolute returns with reduced volatility using leverage and derivatives. Category II and some Category I funds focus on unlisted-market strategies—early-stage VC funds target seed to Series A/B disruptors with high return expectations, mid-stage PE funds invest in profitable growth companies with structured exits, and late-stage/pre-IPO funds provide bridge capital to firms nearing listing.

Investors choose AIFs for access to private-market alpha, structural flexibility through bespoke legal frameworks, risk-hedging capabilities in Category III, robust regulatory oversight by SEBI, and tax efficiency—especially for estate and succession planning via pass-through structures in Categories I and II.

The AIF landscape is rapidly evolving. Product innovations, including deep-tech funds, feeder structures, ESG-focused capital, and credit-plus-warrant hybrids, are expanding investment options.

Here we present a full list of all Alternative Investment Funds in India and have segregated as Category 1 Angel Funds ( min investment 25L), Category 2 private debt as well as private equity funds ( min investment 1 Cr), and Category 3 long only equity as well as long short hedge funds ( min investment 1 Cr).