Context:
The Securities and Exchange Board of India (SEBI), the capital markets regulator, has proposed creating a new category of Alternative Investment Fund (AIF) schemes exclusively for accredited investors, offering a lighter regulatory framework compared to regular AIF schemes.
Alternative Investment Fund (AIF)
An Alternative Investment Fund (AIF) is a privately pooled investment vehicle that collects funds from investors for investing in accordance with a defined investment policy, other than traditional securities like stocks or bonds.
Categories:
SEBI classifies AIFs into three categories based on their investment strategy and risk profile:
- Category I: Funds investing in socially or economically desirable sectors (e.g., venture capital, SME funds, infrastructure).
- Category II: Funds employing diverse or complex strategies without leverage (e.g., private equity funds, debt funds).
- Category III: Funds employing diverse or complex trading strategies with leverage (e.g., hedge funds).
