AIF Registration | Alternative Investment Fund Registration

What is an AIF (Alternative Investment Fund) ?

Alternative Investment Funds are a type of pooled investment fund that invests in a variety of alternative assets, such as venture capital, real estate, private equity, hedge funds, and managed futures. Unlike conventional assets like stocks and debt securities, AIFs offer a unique investment avenue to sophisticated private investors who want to diversify their portfolio and explore alternative investment opportunities.

Alternative Investment Fund [AIF] are governed and regulated by the Securities & Exchange Board of India (SEBI). They are not classified under the Mutual Fund regulations laid down by SEBI. According to Regulation 2(1) (b) of the SEBI (Alternative Investment Funds) Regulation, 2012, AIFs are defined as a privately held and managed pool of investment fund of either domestic or foreign origin, organized in the form of a body corporate, company, LLP (limited liability partnership), or a trust. AIFs can be established in any of the forms mentioned above.

AIF’s are private pooled investment funds and are not available through the forms of public issues (like Initial Public Offerings) which are applicable to Mutual Funds or other collective investment Schemes.

Generally, high net worth individuals and institutions invest in Alternative Investment Funds as it requires a high investment amount, unlike Mutual Funds

As per the AIF Regulation 2012, AIF is a fund established in India whether as a Trust or a Company or a LLP which is ::

A Privately pooled investment vehicle that pools funds from sophisticated investors and invests in accordance with defined investment policy to benefit its investors.
Is not an entity registered under the SEBI (Collective Investment Schemes) Regulations, 1999 OR SEBI (Mutual Funds) Regulations, 1996 OR any other regulations issued by SEBI pertaining to pooling of funds or fund management.

Exemptions from AIF Regulations

Entities which do not fall under the purview of AIF Regulations

The landscape of financial regulations in India is broad and complex, with various entities operating within specific regulatory frameworks. One such entity is the Alternative Investment Fund (AIF), which is defined and regulated under the SEBI (Alternative Investment Funds) Regulations, 2012. As part of these regulations, certain entities are explicitly excluded from being classified as AIFs, and others are granted specific exemptions. Understanding these exceptions is crucial for businesses and individuals who are exploring investment opportunities or considering establishing an AIF. The following discussion provides an elaboration on these entities.

Entities covered under other SEBI regulations: AIFs do not include funds that fall under other specific SEBI regulations, namely:
- SEBI (Mutual Funds) Regulations, 1996: Mutual funds are a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, which are managed by an investment company. Mutual funds are covered under their own specific regulations and are not considered AIFs.
- SEBI (Collective Investment Schemes) Regulations, 1999: Collective Investment Schemes (CIS) are also a type of investment vehicle where funds are pooled from various investors to invest in a portfolio of securities. Like mutual funds, CIS are governed under their own regulations and are excluded from being classified as AIFs.
- Other SEBI regulations for fund management activities: There are other SEBI regulations that govern specific types of fund management activities. Funds that are covered under these regulations are also not considered AIFs.
Exemptions from AIF Registration: Certain entities are granted exemptions from registration under the AIF regulations. These include:
- Family trusts for the benefit of 'relatives': Family trusts that are set up for the benefit of 'relatives', as defined under the Companies Act, 1956, are exempted from AIF registration. This means that these trusts can operate without having to comply with the AIF regulations.
- Employee welfare or gratuity trusts: Trusts that are set up for the benefit of employees, including employee welfare trusts and gratuity trusts, are also exempted from AIF registration. These trusts are typically established by companies to provide benefits to their employees.
- Holding companies: Holding companies, as defined under Section 4 of the Companies Act, 1956, are another category of entities that are exempted from AIF registration. A holding company is a company that owns the stocks of other companies, with the aim of controlling the management and policies of the companies it owns. https://www.corpzo.com/aif--alternative-investment-fund-registration