An "alternative investment fund" is a group of pooled funds that are used to invest in venture capital, hedge funds, private equity, and other kinds of investments. A Limited Liability Partnership (LLP) or a firm can create an Alternative Investment Fund
Category 1: The AIF may make investments in start-ups, SMEs, and newly established, financially sound businesses with significant room for expansion.
Among the various funds in this category are: Infrastructure funds: These make investments in businesses that build infrastructure, such as railroads and airports. Venture cash Funds (VCFs): These funds make large-scale cash investments in promising start-up companies.
Angel funds: They make investments in cutting-edge startups that don't get funding from VCF. Every investor in angel funds contributes a minimum of Rs 25 lakh. Fund for social ventures: The fund invests in companies engaged in charitable endeavors. By making investments, they hope to alter society.
Category 2: Leverage is only used by funds to pay for operating expenses that do not fall within categories 1 or 3. The funds in this category are listed below: Debt funds: These funds make investments in the debt securities of unlisted businesses that they deem to have strong development prospects and adhere to excellent governance practices. Funds of funds: In this case, the funds are invested in further alternative investment funds. Private equity funds: These funds make investments in unlisted companies that are having trouble raising money through the issuance of debt and equity instruments.
Category 3: Funds that use a variety of intricate trading strategies, such as purchasing listed or unlisted derivatives. The funds in this category are listed below : Funds for Private Investment in Public Equity (PEF): These funds purchase shares of public companies at a discount to make investments in them. Hedge funds: They take in capital from firms and investors and use it to make both local and foreign investments in the debt and equity markets. To give its investors a larger return, these schemes employ an aggressive investment strategy.