Alternative Investment Funds are a type of investment distinct from traditional investment instruments. It’s a privately managed pooled fund. In general, institutions and HNIs invest in AIFs when large investments are required. The SEBI (Alternative Investment Funds) Regulations, 2012 apply to these investment vehicles. AIFs can be formed as a corporation, Limited Liability Partnership (LLP), trust, or other entity. But one should know about the best AIF in India before investing.
What are the types of AIFs?
SEBI has classified Alternative Investment Funds into three categories in India.
These funds invest in small and medium-sized enterprises (SMEs), start-ups, and new financially feasible businesses with significant economic growth prospects.
VCF (venture capital fund):
VCF can assist them in overcoming their financial difficulties. It can help new-age entrepreneurial firms that involve huge amounts of funding in their early stages. These funds make investments in start-ups with high growth potential. When allocating resources, HNIs invest in VCFs using a high-risk, high-return strategy.
These investors are people who invest in new businesses. They bring with them early business management experience. These funds invest in start-ups that do not receive VCF funding. Each angel investor must make a minimum investment of Rs. 25 lakh.
These funds are invested by investors who are bullish on infrastructure development.
Social venture funds:
These are the funds that invest in socially responsible businesses. They are a type of philanthropic investment, but they have the potential to generate decent returns for investors.
Private equity funds:
A private equity fund continues to invest in private companies that are not publicly traded. These funds typically have a lock-in period ranging from 4 to 7 years. Unlisted companies find it difficult to raise capital by issuing equity and debt tools.
This fund invests largely in debt securities issued by unlisted companies. Typically, such businesses adhere to good corporate governance models and have high growth potential. They have a poor credit rating, making them a risky investment for conservative investors. According to SEBI guidelines, debt funds cannot be used to make loans.
Fund of funds:
These investments are made in other Alternative Investment Funds. They do not have an investment portfolio and instead concentrate on investing in various AIFs.
Private investment in public equity fund (PIPE):
Here investors invest in publicly traded company stock. They obtain shares at a reduced cost. Due to less paperwork and administration, investing through PIPE is more convenient than investing through a secondary issue.
Hedge funds pool funds from accredited investors and institutions. These funds make investments in domestic and international debt and equity markets. To generate returns for investors, they employ an aggressive investment strategy. On the other hand, hedge funds are expensive because fund managers can keep charging an asset management fee of 2% or more. They may also charge a fee of 20% of the returns generated.
Who is eligible to invest in AIF?
- AIFs are available to investors who want to diversify their portfolios and meet the following eligibility criteria.
- These funds are open to residents of India, non-resident Indians, and foreign nationals.
- The minimum investment limit for investors is Rs. 1 crore, while the minimum investment limit for directors, staff, and fund managers is Rs. 25 lakh.
- AIFs have a three-year minimum lock-in period.
- Except for angel funds, the number of investors in each scheme is limited to 1000, where the investor reaches up to 49.
What are the key advantages of investing in the best AIF in India?
AIFs generally have higher potential returns than other alternative investments. The massive pooled amount allows fund managers to devise flexible strategies to maximise returns.
- Low volatility: AIFs are unrelated to stock markets. These funds have lower volatility, especially when compared to traditional equity investments. As a result, it may be suitable for risk-averse investors seeking stability.
- Diversification: These funds provide much-needed portfolio diversification. They serve as a buffer during an economic meltdown or market fluctuations.
Why consider investing in AIF?
AIFs combine a mutual fund’s operational simplicity with a PMS’s flexibility, resulting in a perfect blend geared toward generating the best possible performance for a specific investment objective.
These products can employ complex strategies such as non-listed equity investments, long-short hedging strategies, and so on to improve risk-adjusted performance.
Here we are discussing the three AIFs of our well-known and well-performed AMCs. Hence enthusiastic investors can get a glimpse of their profile.
Unifi High Yield Fund (HYF):
Unifi was founded in 2001 as a specialised Portfolio Management firm offering new investing methods with higher risk-adjusted returns. The core team at Unifi has an average of 20 years of capital market experience.
Unifi, one of the best AIF in India, is always focused on building a relationship by providing services tailored to each of our clients. Unifi’s commitment to its clients is reflected in a strong in-house research team, excellent levels of service, and relationship continuity. Each fund has consistently outperformed its benchmarks throughout Unifi’s exceptional twenty-year track record.
- Investment philosophy:
Unifi High Yield Fund (HYF) is a discretionary fund that focuses on capital market event arbitrage and fixes income investment prospects to achieve net post-tax returns of 3% above inflation per year (CPI).
The goal is consistently to outperform traditional fixed income methods in compounded annual returns while focusing on capital preservation. The least ticket size for this fund is one crore.
Abakkus Asset Manager LLP:
It is an Indian alpha-centric asset manager. Mr Sunil Singhania launched it in 2018 and named it the abacus, the simplest ancient computing device. Abakkus’ goal is to become one of India’s most reputable and effective asset managers.
- Investment philosophy:
Profitability for growth companies is expected to grow faster than the market average.
Stocks with reasonable future growth are profoundly undervalued for value.
Buy and hold: Invest in stocks as if they were a company. Invest as though you were a partner.
SageOne Investment Managers LLP:
Sage One Investment was founded in 2012 by Mr Samit Vartak, and they provide investment management services through PMS and AIF. They create and manage a portfolio of high conviction growth ideas available at or below fair value.
- Investment philosophy:
SageOne thinks of investing in fast-growing companies. They identify and track industries that gain and maintain market share, contributing significantly to earnings growth.
The criteria they use to select these businesses is that they have potential long-term growth of more than 20% per year and 25% at the portfolio level.
SageOne’s primary focus remains on superior and elevated businesses. They would not buy a bad business regardless of its price.
AIFs are an intriguing investment opportunity for those investors, primarily HNIs, who seek high returns while unwilling to take high risks. Investors can conduct extensive market research and choose an AIF category based on their financial objectives and risk tolerance. Here, you found some of the best AIF in India to motivate investors. You can reach AIF & PMS Experts India for the best advice on your investing opportunities. People can reach us through email at [email protected] or call at 8368586435 or 1800 210 1995. You may also visit our page https://aifpms.com/contact/