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Finance, the realm where opportunity and risk dance in harmony, has captivated countless minds over the ages. From the pages of classic finance books to the bustling trading floors of today, investors have continually sought innovative ways to diversify their portfolios and capture exceptional returns.

In this quest, alternative investment funds have emerged as an intriguing option that offers a fresh perspective on investment opportunities. Let’s explore some of the top alternative investment funds in India as well as how to invest in these funds.

Understanding Alternative Investment Funds

Alternative investment funds, as the name suggests, offer investors an alternative to traditional investment avenues. These funds are managed by professional fund managers who deploy capital into non-traditional assets such as private equity, real estate, infrastructure, distressed assets, and more. The aim is to generate attractive risk-adjusted returns over the long term.

One key advantage of AIFs is that they are designed to provide diversification and potential protection against market volatility.

These funds are classified into three broad categories:

  • Category I funds which primarily invest in start-ups, early-stage ventures, social ventures, SMEs, and infrastructure;
  • Category II funds which invest in private equity (PE) funds, debt funds, or a combination of various AIFs; and
  • Category III funds which aim for short-term capital appreciation and include hedge funds and private investments in public equity (PIPE) funds.

Category I and II AIFs are close-ended funds with a minimum tenure of three years, while Category III funds are open-ended. This distinction allows investors to choose the investment horizon that aligns with their financial goals. Each AIF scheme has a cap on the number of investors it can accommodate. Most schemes cannot have more than 1000 investors, ensuring a controlled investor base.

AIF sponsors in Category I and II must contribute a minimum of 2.5% of the fund corpus or Rs. 5 crores (whichever is lower) towards the initial capital investment. In Category III, this contribution increases to 5% of the corpus or Rs. 10 crores. This requirement ensures that sponsors have a vested interest in the fund’s success.

Top Alternative Investment Funds in India

Here are some of the top sought AIFs under the different categories as mentioned above:

1️⃣ Private Equity Funds: Private equity funds invest in privately-held companies with growth potential. These funds play an important role in the development of small and medium businesses. Over the past 13 years, private equity funds have raised around $100 billion in India. They provide capital, expertise, and strategic guidance to help these companies expand and succeed.

2️⃣ Real Estate Funds: Real estate funds pool investors’ money to invest in various real estate projects. These funds may focus on residential, commercial, or mixed-use properties. Traditionally, investing in real estate required a considerable amount of capital. However, with the advent of Real Estate Investment Trusts (REITs) and real estate platforms, investors can now invest in real estate with smaller amounts.

3️⃣ Venture Capital Funds: Venture capital funds target early-stage companies with high growth potential. They provide capital and mentorship to help these startups scale up. India is one of the largest startup ecosystems in the world, making venture capital funds a vital source of capital for new entrepreneurs.

4️⃣ Hedge Funds: Hedge funds are alternative investment funds that collect money from investors to invest in highly risky equity markets, international debt, and domestic debt. Hedge funds aim for short-term capital appreciation by aggressively managing investments. They invest in domestic and international markets to generate high returns and are popular among accredited investors with a high net worth

5️⃣ Infrastructure Funds: Infrastructure funds invest in projects such as roads, power plants, airports, and ports. These funds aim to capitalize on the increasing infrastructure development in India.

6️⃣ Peer-to-Peer Lending: Peer-to-peer (P2P) lending platforms have gained popularity as an alternative investment option. These platforms connect borrowers directly with lenders, cutting out traditional banks. Lenders can earn attractive interest rates by lending money to borrowers who need capital.

How to Invest in Alternative Investment Funds

? Research and Due Diligence: Conduct thorough research on different alternative investment funds available in the market. Look into their strategies, historical performance, and track record.

? Consult with Financial Service Providers: Seek guidance from financial advisors or professionals who specialize in alternative investments. They can provide valuable insights and help you navigate the complexities of these funds.

? Understand the Investment Process: Familiarize yourself with the investment process of the chosen alternative investment fund. This includes knowing the minimum investment requirement, subscription process, and any associated fees or charges.

? Complete the Necessary Documentation: Fill out the required forms and provide the necessary documentation to comply with the regulatory and legal requirements of investing in alternative funds.

? Monitor and Review: Regularly monitor the performance of your investments and review the fund’s progress. Stay updated with any changes or developments in the fund and make informed decisions based on your investment goals.

Rurash Financials offers a wide range of alternative investment options, including private equity, real estate, hedge funds, venture capital, and more. We work with investors to understand their financial goals, risk appetite, and investment horizon, and provide tailored investment strategies that align with their objectives.

One of the key advantages of investing with Rurash Financials is our investor-first approach and transparency-focused portfolios. We prioritize the interests of our clients and strive to provide comprehensive information and insights to help investors make informed investment decisions.

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