Alternate Investment Funds (AIFs)

August 21, 2023

GS Paper III Indian Economy

Context:

The private credit alternative investment fund (AIF) space is witnessing heightened action this financial year (2023-24), with the change in taxation of debt mutual funds (MFs).

About Alternative Investment Fund (AIF):

21.3

It refers to the collection of pooled investment funds that infuse in hedge funds, private equity, venture capital, and other investment types.
They are defined under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations 2 (1) (b), 2012 set up by the SEBI.
It can be established through a company or a Limited Liability Partnership (LLP).

Benefits of Investing in AIFs:

High Return Potential: AIFs generally have a higher return potential than other investment options.
Low Volatility: AIFs are not directly related to stock markets. Volatility in these funds is less, particularly when compared with traditional equity investments.
Diversification: These funds allow much-needed diversification in an investment portfolio. They act as a cushion at the time of financial crisis or market volatility.

News Source: Business Standard