ALTERNATIVE INVESTMENT FUNDS
Accrue
Alternative Investment Funds (AIF) in India
Access start-ups & private equity. Hedged strategies. Private credit. Real estate & infrastructure funds.
Through AIFs, you can access…
01Startups. SMEs. Growth companies. Pre-IPO equity.
- ◆ India is the world’s 3rd largest startup ecosystem. AIFs let you invest in these companies before they go public.
- ◆ Own equity across every private-market stage — angel, seed, Series A–D, growth capital, SME expansion, and pre-IPO rounds.
02Long-short strategies.
- ◆ These funds buy stocks they expect to rise and short stocks they expect to fall — so they can make money in both directions. Some can hedge up to 100% of the portfolio.
03Private credit. Real estate. Infrastructure.
- ◆ Lend directly to businesses at fixed terms and high yields — returns come from contracts, not stock market movements.
- ◆ Invest in real estate and infrastructure projects — without buying property yourself.
Three categories. Different rules. Different roles.
SEBI classifies AIFs into three categories. The minimum investment is ₹1 crore per investor. Angel funds (Category I) allow entry at ₹25 lakh for accredited investors — individuals with annual income above ₹2 crore or net worth above ₹7.5 crore.
CATEGORY I
Category I — Government-incentivised
Invests in startups, early-stage ventures, SMEs, infrastructure, and social enterprises. Cannot employ leverage. Close-ended. Typical tenure: 5–12 years. Includes venture capital funds, angel funds, SME funds, and infrastructure funds.
CATEGORY II
Category II — Standard alternatives
Private equity, private credit, real estate, distressed assets, and fund of funds. No leverage beyond operational needs. Close-ended. The largest segment — approximately 74% of total AIF commitments (Source: SEBI AIF data).
CATEGORY III
Category III — Complex strategies
Long-short equity, PIPE funds, hedge funds, and multi-strategy approaches. Can employ leverage up to 2x NAV. May be open-ended or close-ended. Category III recorded 43.3% year-on-year growth in commitments (Source: SEBI AIF data).
The AIF industry is ₹15.7 lakh crore.
Source: Cafemutual, AIF commitments data (Dec 2025)
FOR INVESTORS EVALUATING AIFS
Start an AIF conversation with Accrue.
Share a few details. We respond to set up an initial conversation — typically within 2 working days. No obligation.
What to understand before committing ₹1 crore for 3+ years.
Lock-in and liquidity
Category I AIFs lock capital for 5–10 years. Category II: 3–7 years. Category III may be open-ended with periodic redemption windows. There is no daily NAV, no exchange listing, and no established secondary market. Capital committed is capital locked.
J-curve effect
In PE and VC AIFs, returns are typically negative in the early years as fees are charged while investments have not yet matured. This is structural, not a sign of failure.
Vintage risk
The year an AIF launches materially affects returns. Capital deployed at the top of a cycle faces different exit conditions than capital deployed during a correction.
Performance dispersion
The gap between the best and worst AIF in the same category is far wider than in mutual funds. Manager selection is the dominant driver of returns.
AIF access for NRI investors.
FEMA permits NRI investment across all three AIF categories, through NRE or NRO accounts.
BANKING ROUTES
NRE vs NRO accounts
NRE accounts offer full repatriation of principal and returns. NRO accounts carry annual repatriation limits. The choice affects post-investment flexibility.
GIFT CITY
GIFT City AIFs
GIFT IFSC offers USD-denominated AIF structures with tax benefits for non-resident investors — a distinct route for dollar-denominated India exposure.
For a broader overview of cross-border investment considerations for NRI families, see Accrue’s dedicated NRI page →
Frequently asked questions.
Can I invest in AIFs with ₹25 lakh?
The standard SEBI-mandated minimum is ₹1 crore per investor. Angel funds under Category I permit entry at ₹25 lakh for accredited investors. For most strategies — private credit, long-short, PE — the minimum remains ₹1 crore.
How liquid are AIFs compared to PMS or mutual funds?
Category I and II AIFs lock capital for 3–10+ years with no daily NAV, no exchange listing, and no established secondary market. Category III open-ended funds offer periodic redemption windows. PMS offers daily liquidity with notice. Mutual funds offer daily redemption. AIFs are structurally illiquid — capital committed is capital locked.
What is the real all-in cost of AIF investing?
Management fee (1–2.5% p.a.), performance fee (15–20% of profits above an 8–10% hurdle), plus GST, fund expenses, and legal costs. High-water mark provisions and clawback mechanisms protect against over-earning by the manager.
Should I choose AIF or PMS?
Different instruments for different roles. PMS provides segregated accounts with direct stock ownership — daily liquidity, investor-level tax on each trade. AIFs are pooled vehicles accessing private markets, unlisted securities, and complex strategies — with multi-year lock-ins. PMS minimum is ₹50 lakh; AIF minimum is ₹1 crore. The choice depends on the role the allocation plays in the overall portfolio.
Can NRIs invest in AIFs? What about US-based NRIs?
FEMA permits NRI investment across all three categories through NRE or NRO accounts. US NRIs face additional complexity: PFIC classification risk, FATCA compliance, and Form 8621 filing. Many AIF managers are cautious about accepting US NRI investors. GIFT City IFSCA offers USD-denominated AIF structures with tax benefits for non-residents. Cross-border tax advice is essential.
How does Accrue evaluate AIFs?
Accrue evaluates across five dimensions: strategy consistency, manager track record and team stability, cost structure and fee waterfalls, vintage and cycle positioning, and fit within the investor’s existing portfolio. Accrue is a distributor — it evaluates and distributes AIFs from SEBI-registered managers.
What risks should I understand before committing?
Lock-in periods of 3–10+ years, J-curve in PE/VC funds (negative early returns as fees are charged before investments mature), limited liquidity, wide performance dispersion between top and bottom quartile managers, complex tax treatment (especially Category III), vintage risk (entry timing matters), and no secondary market infrastructure for most funds.
Answers are for general information and educational purposes only. They do not constitute personalised investment advice or an offer to subscribe to any AIF scheme. AIF investments are subject to market risks. Past performance is not indicative of future returns. Consult a SEBI-registered investment adviser for personalised guidance.
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