Alternate Investment Funds (AIFs)

PWOnlyIAS

August 21, 2023

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): 

  • 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

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UDAAN PRELIMS WALLAH
Comprehensive coverage with a concise format
Integration of PYQ within the booklet
Designed as per recent trends of Prelims questions
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