According to data collected by SEBI on March 31, investments in category 2 funds increased from Rs 1.9 crore to Rs 42,000 crore in FY23.
India’s wealthy, family offices and institutional investors are putting more money into class 2 alternative investment funds, which include private equity, credit, and IPO financing. The hearing document suggests that Sebi has said that alternative investment funds cannot directly or indirectly borrow funds to make investments. Here’s everything you need to know.
Alternative Investment Funds in numbers
“Compared to Tier 1, which primarily strives to be social, we see more funds in Tiers 2 and 3, both of which are strictly commercial. Hedge funds and PIPE funds’ long-term and short-term investments fall under category 3.
According to reports of highly skilled corporate sectors, recent deals in category 2 funds projected an internal rate of return of 16-18%. Category 3 funds have been returned -5 percent compared to last year’s benchmarks, and some of the corporate manage over Rs 1,000 crore in two Category 3 AIFs.
In Equity Investment Category 3, we at Rurash Financials focus over on quality companies that can grow earnings faster than nominal GDP and provide a ‘margin of safety’ at entry-level valuations,” he said. According to him, Class 3 AIFs are growing faster, due to measurement-agnostic long-only equity options and complex products such as long-only equity options and complex products such as long-short investments. better income.
AIFs are not strictly Regulated
As the Securities and Exchange Board of India recently issued several circulars related to Alternative Investment Funds which clarified the standard approach for portfolio valuation and the rules for initiating liquidation proceedings.
The market regulator has also asked alternative investment funds to submit direct plans. “There are no significant failures of a fund or anything that would require it. I would say that it is only a precautionary measure to prevent any of these omissions, violations,, or industrial failures,” “The alternative mutual fund industry is not highly unregulated or highly regulated, it’s somewhere in between.”
Alternative investment funds are niche and sophisticated financial products that cater to high-net-worth individuals and institutional investors. Investing with a standard option means that the investor gets help from the distributor. The introduction of direct plans would increase options for institutional and experienced individual investors. “The balance between growth and management must be maintained. Any steps taken by the regulator to improve this and develop market integrity are always welcome. “Rurash Financials are highly expedited and heavily engaged with the regulatory guidelines on various aspects and issues affecting the growth and governance of AIFs.
Invest & Explore in Alternative Investment Funds with Rurash Financials?
If an investor meets the requirements listed below, they may invest in an alternative investment fund to diversify their portfolio:
- Foreigners, NRIs, and resident Indians may invest in these funds.
- For investors, the minimum investment amount is Rs. 1 crore, while it is Rs. 25 lakh for directors, staff, and fund managers.
- AIFs have a three-year minimum lock-in duration.
- The number of investors in every scheme is restricted to 1000, except for angel funds, where the number of investors goes up to 49.
Advantages of Investing in AIFs
Here are some benefits of investing in alternative investment funds:
1) High earning potential
Alternative investment funds usually have a higher return potential than other investment options. A large total amount gives fund managers ample room to prepare flexible strategies to maximize returns.
2) Low volatility
Alternative investment funds are not directly linked to the stock market. The volatility of these funds is lower, especially compared to traditional stock investments. Therefore, it can be suitable for risk-averse investors looking for stability.
3) Diversification
These funds provide much-needed diversification in an investment portfolio. They act as a buffer during a financial crisis or market instability.
Key Take Away
Alternative Investment Funds are a lucrative investment option for those investors, mostly HNIs, who aspire to receive high returns and are unwilling to take high risks. Based on their financial objectives and level of risk tolerance, investors can carry out extensive market research and invest in a certain type of AIF.
At Rurash Financials, our expert team brings you the opportunities to invest in AIFs across multiple asset classes.
To know more about Alternative Investment Funds, Reach us today or write to [email protected]
