Alternate Investment Funds are a special category of Funds under Securities and Exchange Board of India AIF Regulation Act. Such Funds have a large ticket size, usually one crore Indian Rupees. They have more risk associated with them as compared to stocks, bonds and mutual funds. Alternate Investments Funds include:
Venture Capital Funds
Venture Capital Funds are Funds which invest in a new business at a very early stage. Such business are not yet listed on a Stock Exchange. The minimum ticket size for investment in such funds is Rs. 1 crore. The minimum fund/ scheme size is Rs. 20 crore. The tenure for investment in such funds is typically 3 to 5 years. Venture Capital Funds usually come enter the business at stage two, i.e. after the Angel Funds.
Angel Funds
Angel Funds are a type of Venture Capital Fund. They are the first to invest in any new business, usually when the business is at the concept stage or just starting up. The minimum ticket size for investing in Angel Funds in India is Rs. 25 lacs. The maturity period can be up to 3 years. The minimum fund/ scheme size is Rs. 10 crore.
Private Equity
Private Equity funds invest in businesses that have passed the initial phase of setup i.e. when the business is scaling up. Hence the risk factor associated with such investments is lower than Venture Capital Funds. The maturity period of investments is about 3 years. The minimum investment ticket size is Rs 1 crore. Private Equity Funds may also invest in businesses which are well established but are facing any headwinds or challenges. Private Equity Funds also contribute to the business in terms of technical and management know how.
Real Estate Investment Trust
A Real Estate Investment Trust (REIT) is formed to pool the investments from investors and invest in Real Estate. They typically earn their revenue in the form of Rent or Lease. The revenue so generated is distributed among the investors in the scheme. REITs allow investors to make relatively smaller investments than buying property and thus allows them to benefit from Real Estate investments. The minimum ticket size for investment in REIT is Rs. 1 lacs. The investors also benefit from appreciation in the value of the properties the fund has invested in.
Hedge Funds
Hedge funds are funds which invest in various asset classes across countries. They try to get the best returns for the investors by searching for opportunities in various assets and across countries.
International Funds
International Funds are funds which invest in securities issued in foreign countries and listed on Foreign Stock Exchanges. Such funds sell their units in the domestic market and invest in securities issued in international markets. Investments in such funds are subject to the variations in the Currency Rates, like USD, GBP, Euro, Yen etc.
Fund of Funds
A Fund of Fund is a Mutual Fund scheme which invests in another Mutual Fund scheme or schemes. The Expense ratio is high in such schemes as the investors have to bear the cost of the scheme as well as the Mutual Fund scheme in which the Fund invests.
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