An Alternative Investment Fund is a privately pooled investment vehicle registered with SEBI that invests in assets outside conventional stocks and bonds — Private Equity, Venture capital, Structured Credit, Real Estate and Hedge-fund strategies. SEBI prescribes a minimum investment of ₹1 crore for an investor to participate. DhanTarang distributes AIFs as Placement Agent and Referral Lead Generator for a few fund houses.
An Alternative Investment Fund (AIF) is a privately pooled investment vehicle established in India that collects money from HNI & UHNI investors and invests it according to a defined strategy, under the SEBI (Alternative Investment Funds) Regulations 2012. AIFs invest in assets that sit outside conventional listed Equity and Debt — Private Equity, Venture Capital, Structured Credit, Real Estate, Infrastructure and complex Trading Strategies.
A Private Placement, restricted to investors who commit at least ₹1 crore. Not offered to the public at large.
SEBI classifies AIFs into three categories, and the category determines what the fund can invest in, whether it can use leverage, how long it runs and how it is taxed. Getting the category right is the first step in understanding any AIF.
SEBI prescribes a minimum investment of ₹1 crore per investor in an AIF. There are two exceptions: employees and directors of the AIF or its Manager can invest from a lower threshold, and Angel Funds operate on a separate, lower minimum for angel investors.
The commitment is usually not paid all at once. Most Category I and II funds call capital in tranches over the investment period, as opportunities are identified.
You commit a total amount to the fund, at least ₹1 crore, through a Contribution Agreement. The commitment is a promise to fund, not an immediate transfer of the whole sum.
The Manager draws down your commitment over the investment period as investments are made. You transfer money against each capital call, not upfront.
The Private Placement Memorandum sets out what the fund will invest in, the sectors, the concentration limits and the tenure. The Manager operates within that mandate.
Category I and II funds are close-ended with a minimum tenure of three years, often longer, and the tenure can be extended in line with the regulations and unit-holder consent.
You receive distributions as underlying investments are sold, rather than as a regular income stream. The timing depends on when exits happen, which is not fixed in advance.
All three are professionally managed. They differ in who can invest, what they can hold, and how easily you can get out.
Read more about PMS or Mutual Funds.
Taxation depends on the category. Category I and Category II AIFs have pass-through status under Section 115UB of the Income Tax Act: income other than business income is taxed in the hands of the investors, as though they had earned it directly, rather than at the fund level. Business income earned by the fund is taxed at the fund level.
Category III AIFs do not have pass-through status. Income is taxed at the fund level, and the rate depends on how the fund is structured and the nature of the income. Investors receive distributions after tax has been accounted for at the fund.
AIF taxation depends on the category, the structure of the fund and your own circumstances. Please consult a qualified tax professional before making a decision based on tax treatment.
Category I and II AIFs are close-ended and run for years. There is no practical way to exit early. Commit only money you will not need for the full tenure.
AIFs typically hold a small number of positions. A single investment going wrong can affect the whole portfolio in a way it would not in a diversified scheme.
In many funds you commit before the underlying investments have been identified. You are backing the Manager and the strategy, not a known portfolio.
Unlisted holdings are valued periodically rather than daily, and the reported value between valuation dates is an estimate. There is no daily NAV as there is with a Mutual Fund.
AIFs carry no assured or guaranteed return. Capital is at risk, and outcomes depend on Manager skill and exit timing.
AIFs suit HNI & UHNI investors.
AIFs are a satellite allocation on top of a built core of Mutual Fund holdings. They are not a starting point.
The tenure runs for several years with no practical exit. The money committed must be money you will not need in that period, under any circumstances.
Entities with the scale to meet the ₹1 crore minimum comfortably as part of a wider allocation, and the reporting requirements to match.
Much of the outcome depends on the Manager and the strategy rather than on a market index. That requires a different kind of due diligence, and a different tolerance for uncertainty.
DhanTarang Fintech Pvt. Ltd. distributes Alternative Investment Funds as a "Placement Agent" & Referral for a few Fund Houses. The Fund is managed by a SEBI-registered AIF Manager, and you contract with the fund directly. DhanTarang does not manage AIF portfolios.
We take you through which category the fund sits in, what it can and cannot invest in, the tenure, the drawdown schedule and the fee structure — before you commit anything.
The PPM sets out the mandate, the risks, the fees and the exit terms. We go through it with you rather than leaving you to work through it alone.
Documentation, KYC, capital call coordination and reporting, with your AIF sitting alongside your Mutual Funds, PMS, Bonds, NCDs and MLDs in one portfolio view.
An Alternative Investment Fund is a privately pooled investment fund registered with SEBI that invests in assets outside conventional listed shares and bonds — such as private equity, venture capital, private credit, real estate and complex trading strategies. It is offered by private placement to a limited set of investors, not to the public, and SEBI prescribes a minimum investment of ₹1 crore.
The minimum investment in an AIF is ₹1 crore per investor. Employees and directors of the AIF or its Manager can invest from ₹25 lakh, and angel investors in an Angel Fund also have a ₹25 lakh minimum. The commitment is usually drawn down in tranches over the investment period rather than paid in full at the start.
Category I invests in start-ups, SMEs, social ventures and infrastructure — areas the government considers economically or socially desirable. Category II covers funds that fall in neither of the other categories, typically private equity, private credit and real estate funds, and does not use leverage beyond day-to-day needs. Category III uses diverse or complex trading strategies and may use leverage, including through derivatives. Categories I and II are close-ended; Category III can be open-ended or close-ended.
Category I and Category II AIFs have pass-through status under Section 115UB of the Income Tax Act, so income other than business income is taxed in the hands of the investors rather than at the fund level. Business income earned by the fund is taxed at the fund. Category III AIFs do not have pass-through status, and income is taxed at the fund level, with the rate depending on the structure and the nature of the income.
A Mutual Fund is a public offering that anyone can invest in from ₹500 a month, invests mainly in listed securities, publishes a daily NAV, and can be redeemed on any business day. An AIF is a private placement with a ₹1 crore minimum, can invest in unlisted and alternative assets, is valued periodically rather than daily, and is generally locked in for the fund tenure.
In PMS the securities are held in your own demat account, in your own name, with a ₹50 lakh minimum, and the portfolio is mainly listed securities. In an AIF you hold units of a pooled private fund with a ₹1 crore minimum, and the fund can invest in private equity, private credit, real estate and complex strategies that PMS typically does not access. PMS is also considerably more liquid.
Category I and Category II AIFs are close-ended with a minimum tenure of three years, and in practice many run for five to eight years. The tenure can be extended in line with the regulations and unit-holder consent. There is no practical early exit, so the money committed should be money you will not need during that period.
No. AIFs carry no assured or guaranteed return, and capital is at risk. Outcomes depend heavily on the Manager, the strategy and the timing of exits, and it is possible to receive back less than the amount committed. AIFs are also illiquid and more concentrated than diversified schemes.
NRIs can generally invest in AIFs, subject to the fund accepting NRI investors, the applicable foreign exchange regulations and the tax position in both India and the country of residence. Whether a particular fund accepts NRI subscriptions is set out in its documentation, so check before proceeding.
Speak to our team about your objective, the amount you are considering and how long you can commit it. We will take you through the categories, the strategies available, the drawdown schedule, the fee structure and the risks, and go through the Private Placement Memorandum with you. Call +91 730 4343 927 or book an appointment. AIFs are offered by private placement, so there is no online application.
AIFs are offered by private placement, so there is no online application and no public scheme list. If an AIF allocation is something you are considering, the useful first step is a conversation about your objective, your time frame and how it would sit alongside what you already hold. There is no fee to you for that conversation.
