Glossary
AIF (Alternative Investment Fund)
A SEBI-regulated pooled investment vehicle — the legal structure for most Indian VC funds, hedge funds, and private equity in 2026.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
AIF (Alternative Investment Fund) is a SEBI-regulated pooled investment vehicle structured under the SEBI (Alternative Investment Funds) Regulations, 2012. AIFs are the legal default for Indian VC funds, hedge funds, and private equity in 2026.
AIFs are categorised: Category I (VC, SME, social, infrastructure funds — government-encouraged), Category II (PE, debt, and other funds not falling in I or III — most Indian VC funds sit here), Category III (hedge funds and complex strategies).
India Context
Most Indian VC funds you raise from are AIF Cat-II. They pool capital from Indian and foreign LPs (subject to FEMA), and deploy through CCPS into startups. Cat-II AIFs have a 10-year typical fund life with 3-4 year deployment window. AIF managers earn a 2% management fee and 20% carried interest above a hurdle rate.
Minimum LP investment in AIFs is ₹1Cr per investor (SEBI rule). Most Indian micro-VC funds (₹50-500Cr AUM) are Cat-II AIFs domiciled either in India or in GIFT City.
Example
3one4 Capital Fund III is registered as a SEBI Cat-II AIF with ₹450Cr AUM. LPs commit ₹1Cr minimum each. The fund deploys over 3-4 years into 25-30 portfolio companies via CCPS investments of ₹5-15Cr each. After year 7-10, the fund returns capital to LPs from exits, retaining 20% carried interest above an 8% hurdle.
Frequently Asked Questions
Related Terms
Apply what you've learned
See this term at work on real Indian companies.
AletheiaAI checks market narratives against the filings behind them — screener, company disclosures, and sector reports across India’s listed companies, free.