What are Alternative Investment Funds?
Summary: This article discusses the meaning of alternative investment funds and its relevance in the business world. Also, the difference between the alternative investment funds and traditional form of investments are explained.
Alternative Investment Funds consists of tailor-made investment arrangements that invest in non-traditional forms of investment alternative. Investment alternatives basically refer to all kind of investments that are different from the traditional institutions like mutual funds and do not include conventional investments like bonds, stocks, and cash.
An Alternative investment fund (AIF) is a privately pooled investment fund that includes Investment alternatives such as:
Private equity
Hedge funds
Managed futures
Real Estate
Commodities
Derivatives contracts
Types of Investment Alternatives
The alternative investment funds can be studied under three broad classifications:
Category I
AIF in this category receives concessions from the ruling government. They include funds like infrastructure funds, social venture funds, SME funds and venture capital funds.
Category II
These AIFs do not receive any concession or special incentives from the government and therefore they have the freedom to be invested anywhere without raising a debt. It includes funds like private equity funds and debt funds.
Category III
These funds work for short-terms gains and operate without any government concession. Hedge funds are included in this category.
Alternative Investment Funds in India:
Alternative Investment Fund or AIF in India are defined as any fund established or incorporated in India, that is a privately pooled investment vehicle, and collects funds from cultured investors (both Indian or foreign), in order to invest it in accordance with a defined investment strategy for the profit of the investors.
In India, the SEBI’s Alternative Investment Funds Regulations 2012 controls the working of Alternate Investment Funds. Accordingly, there are nine different kinds of alternative investment funds in India, which include:
Venture Capital Funds
Private Investment in Public Equity Funds
Private Equity Funds
Debt Funds
Infrastructure Equity Funds
Real Estate Funds
SME Funds
Social Venture Funds
Strategy Funds (It includes all other varieties of the funds like the Hedge Funds)
The government of India has planned to encourage foreign Investment in Alternative Investment Funds in India by dropping foreign direct fund (FDI) and Foreign Portfolio Investors (FPI).
There are many benefits of investing in Investment alternatives; Investment in AIFs allows the country to treat foreign money as the domestic capital. This allows a fresh surge of foreign money in India that gives a boost to the other investments of the country. Long term investment in AIFs can result into accelerated growth of the investors. In fact, the domestic investors of AIFs also get a better return on their investment.
Investments in Alternative Funds in India have doubled in the past one year in India and many economists predict the steady growth of the same, in the future.
Author Bio:
Here, the author of this article sharing his great experience about alternative investment funds. He is providing information about types of alternative investment funds in India and much more in detail.