Category II Alternative Investment Fund
Classification of Category II funds is often done by elimination meaning that: All those funds that are not described under category I and III AIF, fall under category II. Category II funds invest in various equity debt securities come and attract no incentives or concessions by the government. Such funds typically invest in unlisted private companies.
Funds resort to borrowing or leveraging funds for its underlying activities in accordance with the provisions laid down by SEBI. Some examples of Category II Alternative Investment Funds [CATEGORY II AIF] are Private Equity Funds [PE Funds], Real Estate Funds, Debt Funds and funds established for distressed assets.
Category 2 Alternative Investment Funds shall not engage in borrowing or leveraging activities except for temporary funding needs of up to 10 % of their investible funds for a period ranging from 30 to 365 days.
Category II comprises the following funds:
➲ Private Equity (PE) Fund
Private Equity funds is a Category 2 Alternative Investment Fund which basically normally invests in unlisted private companies against a share of their ownership. Unlisted private companies are not allowed to raise capital by issue of equity or debt instrument to the public. Hence, they turn towards PE funds to fulfil their funding requirements.
Further, PE Funds mitigate their risk by offering its investors with a diversified portfolio of equities managed by highly experienced fund managers. PE funds typically invest for a time period ranging between 4 to 7 years. Post the investment period, PE Funds expect to be able to exit the investment with a considerable profit.
➲ Debt Fund
Debt Fund are privately pooled funds established for primarily investing in debt instruments of listed as well as unlisted companies.
Debt Funds prefer investing in companies with high growth potential & good corporate practices going through a capital crunch as they can be a good investment option for debt fund investors. However, Companies with low credit score generally offer debt securities with a high yield but also accompany with high risk. So
As per the SEBI Regulations, the amount invested in Debt Fund cannot be utilised for the purpose of giving loans, as Alternative Investment Fund is a privately pooled investment vehicle.
➲ Fund of Funds
Fund of funds as the name suggests is a combination of various Alternative Investment Funds. Such funds don’t make their own portfolio or sector-specific investments. Fund of funds is established to invest in a portfolio comprising of other AIFs. Unlike the fund of funds in case of mutual funds, FUND OF FUNDS under AIF are not permitted to invite capital from the public or issue their units to publicly.
Category III Alternative Investment Fund
Category 3 Alternative Investment Funds are funds which aim at short term returns. In order to achieve short-term capital appreciation, such funds engage various complex and diverse trading strategies. Government has offered no incentives or concessions for category 3 Alternative Investment Funds.
Category III Alternative Investment Funds may borrow or leverage funds subject to consent from its investors and to a maximum limit as may be prescribed by SEBI. Category III AIFs may invest in the units other AIF’s from category I, Category II or Category III AIFs. However, Category III AIFs cannot invest in the units of Fund of Funds.
Category III comprises the following funds:
➲ Hedge Fund
Hedge Funds are Category 3 Alternative Investment Funds which pool funds from institutional and accredited investors and invests in domestic as well as international markets by employing different strategies to earn alpha or active returns. Hedge Funds take up leverage & derivatives to a great extent and are aggressively managed with an aim of generating high returns on their pooled capital. Such funds are comparatively less regulated as compared to similar mutual funds and other investment vehicles.
It is to be noted that Hedge Funds are relatively expensive as compared to other financial investment instruments as they generally charge an asset management fee of 2% and collect a high fee up to 20% of the profits earned.
➲ Private Investment in Public Equity Fund (PIPE)
It is a privately managed pool of privately sourced funds reserved for investment in public equity. Private investment in public equity means buying the shares of publicly traded stock at discounted rates. This basically implies that the investor purchases a stake in the company, whereas the investee company receives a capital infusion for its business. https://www.corpzo.com/aif--alternative-investment-fund-registration
Classification of Category II funds is often done by elimination meaning that: All those funds that are not described under category I and III AIF, fall under category II. Category II funds invest in various equity debt securities come and attract no incentives or concessions by the government. Such funds typically invest in unlisted private companies.
Funds resort to borrowing or leveraging funds for its underlying activities in accordance with the provisions laid down by SEBI. Some examples of Category II Alternative Investment Funds [CATEGORY II AIF] are Private Equity Funds [PE Funds], Real Estate Funds, Debt Funds and funds established for distressed assets.
Category 2 Alternative Investment Funds shall not engage in borrowing or leveraging activities except for temporary funding needs of up to 10 % of their investible funds for a period ranging from 30 to 365 days.
Category II comprises the following funds:
➲ Private Equity (PE) Fund
Private Equity funds is a Category 2 Alternative Investment Fund which basically normally invests in unlisted private companies against a share of their ownership. Unlisted private companies are not allowed to raise capital by issue of equity or debt instrument to the public. Hence, they turn towards PE funds to fulfil their funding requirements.
Further, PE Funds mitigate their risk by offering its investors with a diversified portfolio of equities managed by highly experienced fund managers. PE funds typically invest for a time period ranging between 4 to 7 years. Post the investment period, PE Funds expect to be able to exit the investment with a considerable profit.
➲ Debt Fund
Debt Fund are privately pooled funds established for primarily investing in debt instruments of listed as well as unlisted companies.
Debt Funds prefer investing in companies with high growth potential & good corporate practices going through a capital crunch as they can be a good investment option for debt fund investors. However, Companies with low credit score generally offer debt securities with a high yield but also accompany with high risk. So
As per the SEBI Regulations, the amount invested in Debt Fund cannot be utilised for the purpose of giving loans, as Alternative Investment Fund is a privately pooled investment vehicle.
➲ Fund of Funds
Fund of funds as the name suggests is a combination of various Alternative Investment Funds. Such funds don’t make their own portfolio or sector-specific investments. Fund of funds is established to invest in a portfolio comprising of other AIFs. Unlike the fund of funds in case of mutual funds, FUND OF FUNDS under AIF are not permitted to invite capital from the public or issue their units to publicly.
Category III Alternative Investment Fund
Category 3 Alternative Investment Funds are funds which aim at short term returns. In order to achieve short-term capital appreciation, such funds engage various complex and diverse trading strategies. Government has offered no incentives or concessions for category 3 Alternative Investment Funds.
Category III Alternative Investment Funds may borrow or leverage funds subject to consent from its investors and to a maximum limit as may be prescribed by SEBI. Category III AIFs may invest in the units other AIF’s from category I, Category II or Category III AIFs. However, Category III AIFs cannot invest in the units of Fund of Funds.
Category III comprises the following funds:
➲ Hedge Fund
Hedge Funds are Category 3 Alternative Investment Funds which pool funds from institutional and accredited investors and invests in domestic as well as international markets by employing different strategies to earn alpha or active returns. Hedge Funds take up leverage & derivatives to a great extent and are aggressively managed with an aim of generating high returns on their pooled capital. Such funds are comparatively less regulated as compared to similar mutual funds and other investment vehicles.
It is to be noted that Hedge Funds are relatively expensive as compared to other financial investment instruments as they generally charge an asset management fee of 2% and collect a high fee up to 20% of the profits earned.
➲ Private Investment in Public Equity Fund (PIPE)
It is a privately managed pool of privately sourced funds reserved for investment in public equity. Private investment in public equity means buying the shares of publicly traded stock at discounted rates. This basically implies that the investor purchases a stake in the company, whereas the investee company receives a capital infusion for its business. https://www.corpzo.com/aif--alternative-investment-fund-registration
AIF Registration online process , Alternative Investment Fund in India, Venture Fund Registration,…
AIF Registration online, Alternative Investment Fund Registration process online in India, AIF Registration Certificate, Aif Registration online, Onl…
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