A lot of people are now eager to invest their money and want to grow it. There are several investment-related instruments that you can use for that reason. AIFs are the way to go if you want to invest in anything other than cash, bonds, and equities. An arrangement with an alternative investment fund provides a better rate of return than traditional choices.
It necessitates more investment and has a higher risk tolerance than mutual funds.These funds are not aimed at the general public; rather, they are aimed at skilled investors such as HNIs from India and overseas with huge sums of money to participate.
First, let’s go over the fundamentals.
What is an alternative investment fund?
Alternative investment funds are investment programs that distribute their capital among financial instruments other than typical investment possibilities. Real estate, venture capital, angel funds, commodities, private equity, and so on are examples.
What are the various types of AIFs available in India?
AIFs invest in a variety of alternative investment vehicles, such as equities, angel funds, and many others. The following are some of the many forms of alternative asset management:
Category I:
AIFs invest in start-ups, SMEs, and new, financially feasible enterprises with strong growth potential. They consist of the following:
- Infrastructure funds include: These investment schemes generally invest in enterprises that build infrastructure such as railroads, airports, and ports. Individual investors who want to invest in infrastructure development typically use these funds.
- Venture capital funds (VCF): Venture capital funds invest in potential new enterprises that involve a large amount of funding. VCF is frequently invested in by high-net-worth individuals who believe in a high-risk, high-return strategy.
- Angel funds: This form of AIF typically invests in fresh start-ups that are not funded by venture capital funds. Every angel fund participant typically contributes at least Rs. 25 lakhs.
- Social venture capital: Plans for social venture funds to invest in charitable enterprises. These assist individuals in raising their living conditions while also providing great profits to their sponsors.
Category II:
AIF funds in this category do not incur debt for reasons other than everyday operations and include the following:
- Debt funds: These AIF funds try to invest in debt instruments issued by unlisted firms that adhere to solid corporate governance mechanisms and have reasonable development prospects. They are not, however, suitable for conservative investors due to their poor credit rating.
- Funds of funds: These are plans that invest in other alternative investment funds.
- Private equity fund: It invests in unlisted private enterprises that are having problems acquiring financing by issuing stock and debt assets.
Category III:
It helps to leverage and employ sophisticated trading tactics, which include the following:
- Hedge funds: These kinds of alternate funds raise capital from investors and companies to invest in local and global debt and stock markets. These schemes employ an aggressive investing approach in order to give investors a larger return on investment. They also have a high expenditure ratio.
- Private Investment in Public Equity (PIPE): This sort of funding strategy involves investing in public companies by purchasing their stock at a discount.
Why should you invest through an AIF?
Investing in AIFs will give you several benefits.
Protection against volatility:
Investing in AIFs is a terrific strategy to safeguard and steady your portfolio against volatility. These investment plans do not put their money into publicly traded stocks. As a result, they are unrelated to the bigger markets and don’t vary in response to their fluctuations.
Lucrative returns:
Because AIFs offer a wide range of investment possibilities, their investment returns are profitable. When compared to traditional investment vehicles, they provide a greater source of passive income.
Furthermore, because these alternate schemes are not tied to the stock market, the returns are less volatile.
Excellent portfolio diversification:
AIFs deploy their money to a far broader range of assets than the majority of financial products. As a result, they offer good portfolio diversity and can protect your investments during times of market instability or financial catastrophe.
What distinguishes AIF from mutual funds?
Alternative Investment Funds are more flexible than mutual funds since they invest in unlisted stocks and utilize shorting and leverage.
What is the distinction between PMS and AIF?
Each investor has a distinct Demat account in a Portfolio Management System (PMS), and funds are not pooled. Furthermore, people can withdraw their money at any moment. Alternative Investing Funds (AIFs), on the other hand, pool resources for their investment aim and often have a lock-in duration of 3 to 5 years.
As a result, people who are willing to invest for the long term can make the most of an alternative investment fund’s strengths.
Top three AIFs in recent years:
Here, we’re going to discuss the top 3 AIFs.
Alchemy Leaders of Tomorrow Closed-Ended Fund—Series 2
Mr. Hiren Ved manages this closed-ended fund. It necessitates a high appetite for risk for investors.
Their fund’s philosophy:
- It is to adapt to a better tomorrow in the global environment.
- Disruptive Technologies
- Modifications to the legislative architecture
- New commercial equations
- Global politics.
Leaders of Tomorrow in Alchemy
This fund’s investment horizon is long-term. Mr. Hiren Ved also manages this AIF fund.
Their investment strategy:
The fund strategy intends to achieve long-term capital appreciation by investing in firms. Those firms exhibit the best characteristics of adaptation to the new economic normal. Innovation and inventiveness drive that new normal. The fund will make investments in
- Listed Indian stocks
- Private Investment in Public Equity (“PIPES”) in Indian-listed stocks
- IPO possibilities.
ASK Golden Decade Fund
It is a long-only category III AIF. It has a supportive risk management framework.
Their investment strategy:
- Businesses benefit from value movements.
- A pure bottom-up multi-cap buy-and-hold policy comprised of about 25 high-quality companies
- Management competence, asset allocation and dispersion ability, corporate regulatory regimes, integrity, vision, past record, execution, and other factors are all subjectively judged.
- Psychographic optimization as well as values were used to make the final decision.
Parting note:
Starting early with investment is a good thing. It helps to grow wealth with time. Investing in a proper Alternate Investment Fund requires lots of knowledge and expertise, so you may need expert advice. Hence, you can consult with investment-related experts at AIF & PMS Experts India Pvt. Ltd.
We can recommend the best alternative investment fund for you based on your investment objectives and risk tolerance. People may connect with us through [email protected] or call 8368586435 for a better understanding.