Indian Market regulator Security and Exchange Board of India (SEBI) allowed 12 entities to set up Alternative Investment Funds (AIFs), a newly created class of pooled-in investment vehicles for real estate, private equity and hedge funds, in the last two months of October and November 2012.
The 12 Alternative Investment Funds AIFs that were registered with SEBI since October 2010 included India Realty Fund, Dar Mentorcap Film Fund, Capaleph Indian Millennium Small & Medium Enterprises Fund and Capaleph Indian Millennium Private Equity Fund.
SEBI in last few years had already allowed nine AIFs to set up shops in the country. As on 31 August 2012, a total of 20 applications were pending with SEBI for registration as AIFs.
As per the new SEBI guidelines, AIFs can operate broadly in three categories. The SEBI rules is applicable to all AIFs which also includes those operating as private equity funds, real estate funds and hedge funds.
• The Category-I AIFs are those funds that get incentives from the government, SEBI or other regulators. It includes Social Venture Funds, Infrastructure Funds, Venture Capital Funds and SME Funds.
• The Category-II AIFs are those funds which can invest anywhere in any combination but are prohibited from raising debt, except for meeting their day-to-day operational requirements. These AIFs include PE funds, debt funds or fund of funds.
• The Category-III AIFs are those trading with a view to make short-term returns and include hedge funds, among others.
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