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Overview

Alternative Investment Funds in India, often abbreviated as AIFs, have become a buzzword among sophisticated investors, especially High Net Worth Individuals (HNIs). HNIs hold a growing share of the global wealth, with 48% of global wealth controlled by HNIs in 2023, expected to rise to 55% in the near future. HNI AUM (Assets Under Management) invested in AIFs is expected to increase, with HNIs’ AIF allocation expected to double to 25% over the next decade.

As of May 2025, there are 1,550 registered AIFs in India¹. This domain has witnessed remarkable growth, underscored by an almost 110% surge in commitments which escalated to Rs. 13.49 trillion in the fiscal year 2024-25 from Rs. 6.41 trillion in 2021-22². This growth translated to a substantial Rs. 7.07 trillion jump within three years. AIFs have shown superior IRRs (Internal Rate of Returns) compared to traditional Asset Management Companies (AMCs). This higher performance has led to a higher valuation premium for AIFs over traditional AMCs.

The total assets under management (AUM) of AIFs have grown at a CAGR (Compound Annual Growth Rate) of 28% between June FY19 and June FY24s³. 75% of AIFs have successfully generated positive alpha, compared to a lower alpha generation in equity AMCs, where 51% of large-cap funds and 26% of mid-cap funds were unable to deliver alpha over the past year⁴.

Equity AIFs have outperformed the BSE Sensex TRI index PME+ for five consecutive years. 80% of registered AIFs fall under Category I & II (venture capital, private equity, debt funds). ~₹4.4Tn invested, with ~70% allocated to unlisted securities. 44% of new schemes (2022–2024) were launched by first-time fund managers, highlighting strong market confidence⁵.

The breakdown of the alternatives market is dominated by Private Equity (PE) and Real Assets, which are USD 250 billion and USD 125 billion, respectively. Private Credit, a growing segment, stands at USD 25 billion in the Indian market. AIFs are projected to represent 15% of the total AUM in India’s wealth management industry by 2027. 

In light of the burgeoning AIF industry, its regulatory authority, the Securities and Exchange Board of India (SEBI), hasn’t remained a silent observer. SEBI has proactively been fortifying protocols to guarantee investor safety, heighten transparency, and ensure fair practices within the AIF guidelines. 

So, the question arises, what exactly are AIFs? And how do they function within the Indian regulatory landscape?

What are Alternative Investment Funds (AIFs)?

An Alternative Investment Fund (AIF) is a privately pooled investment vehicle that gathers funds from investors, whether Indian or foreign, for investment as per a defined investment policy to benefit its investors. Explicitly regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Alternative Investment Funds) Regulations, 2012, AIFs can be established in India as a trust, company, Limited Liability Partnership (LLP), or a body corporate.

AIFs are becoming a favoured choice for discerning investors, including High Net Worth Individuals (HNIs). With their promise of high returns across diverse asset classes, AIFs are attractive for those aiming to diversify and enhance their portfolios.

Some key terms used in AIFs

1. Carry
   Carry or carried interest in AIF is akin to performance fees which is paid to the investment manager as a share of the AIF’s profits which the investment manager is entitled to if they exceed a specific threshold return. Carry is typically in the range of 15-20% of the profits earned by the AIF in excess of the specified threshold.
2. Hurdle / Preferred rate of return
   Minimum percentage of returns that an investor earns before the Investment Manager can catch-up and charge carry to investor.
3. Catch-up
   Catch-up allows the investment manager to earn the hurdle rate of return on its investment in the AIF but only after the investors have received their investment along with the hurdle rate of return on such investment.
4. Distribution waterfall
   Provides for an order of specified priority in which the distributions are made by AIF which includes the capital contributions, fees, hurdle, catch up (if any), carry, etc.
5. Closing
   Closing is the date fixed by the Investment Manager as a cut-off date to obtain capital commitment from investors.

Regulatory Framework for AIFs

In India, AIFs operate under the purview of the Securities and Exchange Board of India (SEBI). 

Since their establishment in the late 1980s, Venture Capital Funds (VCFs) have been a significant focus for the government to bolster the growth of specific sectors and early-stage companies. However, the desired outcomes in supporting emerging sectors and startups were not realized, largely due to regulatory uncertainties. Recognizing this challenge, in 2012, the Securities and Exchange Board of India unveiled the SEBI (Alternative Investment Funds) Regulations. This was done to categorize AIFs as a unique asset class, similar to Private Equities (PEs) and VCFs.

Any entity wishing to function as an AIF must seek registration with SEBI. While there are various legal structures under which an AIF can be established – such as a trust, a company, an LLP, or a body corporate – trusts are the most commonly chosen form in India.

A typical AIF structure looks like the following –

The entities are:

• Settlor – Person who settles the trust with a nominal initial settlement 
• Trustee – Person in charge of the overall administration and management of the Trust. In practice, this responsibility is then outsourced to the investment manager.
• Contributor – Investor to the Trust (AIF) and makes a capital commitment to the AIF
• Sponsor – Face of the AIF i.e. Person who sets up the AIF 
• Investment Manager – Brain of the AIF i.e. Person who is appointed to manage the investments 
• Custodian – Safeguards the securities and assets of the AIF and facilitates settlement of transactions.
• Merchant Banker – Assists with due diligence certification for PPM.
• Registrar and Transfer Agent (RTA) – Maintains investor records, processes capital calls and distributions, and handles investor communications and reporting.

It’s noteworthy that the roles of the Sponsor and Investment Manager can be unified, with one entity performing both functions.

Categories of AIF

Under the SEBI AIF Regulations, AIFs are classified into 3 distinct categories or types. Each category serves a unique purpose and is characterized by specific investment conditions and varying degrees of regulatory oversight. Below is an overview of the categories, highlighting their primary purpose and key conditions:

Parameters	Category I AIF	Category II AIF	Category III AIF
Definitions	Funds with strategies to invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable. Includes: Venture Capital Funds (angel funds are a sub-category of VCFs)SME fundsSocial Impact FundsInfrastructure FundsSpecial Situation Funds	Funds that cannot be categorized as Category I AIFs or Category III AIFs. These funds do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in the AIF Regulations. Examples – Private Equity or Debt Funds	Funds which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Examples – Hedge funds or funds which trade with a view to make short-term returns
AIF Minimum ticket size	INR 1 crore	INR 1 crore	INR 1 crore
AIF Minimum fund size	INR 20 crore	INR 20 crore	INR 20 crore
Open or close ended AIF	Close-ended fund	Close-ended fund	Can be open or close-ended fund
Tenure	Minimum tenure of 3 years	Minimum tenure of 3 years	NA
Continuing interest of Sponsor / Manager (a.k.a skin in the game)	Lower of:2.5 % of corpusINR 5 crores	Lower of:2.5 % of corpusINR 5 crores	Lower of:5 % of corpusINR 10 crore
Investment outside India	Permissible subject to SEBI approval	Permissible subject to SEBI approval	Permissible subject to SEBI approval
Concentration norms	Cant invest more than 25% in 1 investee company	Cant invest more than 25% in 1 investee company	Cant invest more than 10% in 1 investee company
Borrowing	To not borrow funds except for : (a) temporary funds not more than 30 days (b) less than 4 occasions in a year  Borrowing shall be limited to the lower of:i) 10% of investable fundsii) 20% of the proposed investment in the investee companyiii) undrawn commitment from investors other than the defaulting investors	(Same as Category 1 AIF)	Can engage in leverage & borrowing as per prescribed rules
Overall restrictions / compliances	Low	Medium	High
SEBI registration fees	INR 500,000	INR 1,000,000	INR 1,500,000
Per scheme filing fees	INR 100,000	INR 100,000	INR 100,000

 Table 1: Categories of AIFs

Apart from the categories mentioned above, any of the three categories of AIFs can be classified as a large-value fund (LVFs), provided that each investor is an “accredited investor” as per the AIF Regulations and invests a minimum of INR 70 crores in the AIF. LVFs have certain investment and compliance related exemptions.

Angel Funds also hold a distinct categorization under the AIF Regulations. These funds are a sub-category of Category I AIFs – VCFs, primarily designed to acknowledge and support the unique role of angel investors in the startup ecosystem. The key characteristics of Angel funds are summarised below:

Parameters	Category I AIF
AIF Minimum ticket size	INR 25 lakhs
AIF Minimum fund size	INR 5 crore
Investments	Should be not less than INR 25 lakhs and not more than INR 10 crores, with a minimum lock-in period of 3 years.
Open or close ended AIF	Close-ended fund
Continuing interest of Sponsor / Manager(a.k.a skin in the game)	Lower of:2.5 % of corpusINR 50 lakhs
Investors	Angel investors who meet the specified criteria
SEBI registration fees	INR 200,000
Per scheme filing fees	NIL

Table 2: Angel Funds

Category I AIFs: Nurturing Growth and Social Impact

Category I AIFs are those funds that invest in start-up or early-stage ventures, special situation funds, social ventures, Small and Medium Enterprises (SMEs), infrastructure, or other sectors which the government or regulators consider as socially or economically desirable. These funds often receive incentives or concessions from the government due to their developmental role.

• Venture Capital Funds (VCFs): VCFs primarily focus on providing capital to early-stage, high-growth potential companies that are typically unlisted. They play a crucial role in fostering innovation and entrepreneurship. VCFs invest in businesses with scalable models, aiming for significant capital appreciation as these companies mature and potentially go public or get acquired. Their investments are often long-term and carry higher risk but also higher return potential.
• Angel Funds: A sub-category of Venture Capital Funds, Angel Funds specifically target seed-stage and early-stage startups. They pool money from angel investors (individuals or entities) to invest in budding businesses. A key characteristic is the minimum investment of ₹25 lakh (Rupees Twenty-Five Lakh) for each angel investor in such a fund. Angel Funds often provide not just capital but also mentorship and networking to the nascent companies.
• Special Situation Funds: SSFs are a subcategory of Category I AIFs which invest primarily in Stressed Loans i.e. loans available for acquisition under RBI Master Directions or as part of a resolution plan approved under the IBC, Security Receipts issued asset reconstruction companies registered with the RBI – subject to 6 month lock-in Securities of Investee Companies under financial distress i.e. having stressed loans, security receipts, or undergoing corporate insolvency resolution process.
• Social Venture Funds: Social Venture Funds are unique in their dual objective: generating financial returns alongside a positive social or environmental impact. They invest in businesses or organizations that address critical societal challenges, such as sustainable development, education, healthcare, and livelihood creation. These funds aim to demonstrate that financial viability can go hand-in-hand with social good.

Category II AIFs: Private Markets and Stable Growth

Category II AIFs are those funds that do not fall under Category I or III and do not employ leverage other than for meeting temporary funding requirements. They typically invest in unlisted companies, real estate, or distressed assets, offering investors exposure to private markets. These funds usually have a close-ended structure with a minimum tenure.

• Private Equity Funds (PEFs): PEFs are a significant part of Category II. They invest in mature, unlisted companies to help them grow, expand, acquire other businesses, or undergo restructuring. PE funds often take a controlling or significant minority stake, actively working with management to improve operational efficiency and value before exiting their investment. A typical characteristic of PE funds is their lock-in period, often ranging from 4 to 7 years, reflecting the long-term nature of private company growth and value creation.
• Debt Funds: Within the AIF framework, Debt Funds focus on investing primarily in debt instruments of unlisted companies. This can include structured debt, mezzanine financing, or convertible debt. They cater to companies seeking alternative financing avenues beyond traditional bank loans, often providing capital for expansion, working capital, or specific projects. The returns are typically generated through interest payments and capital appreciation of the debt instruments.
• Fund of Funds (FoFs): FoFs in the AIF context are investment vehicles that invest in other AIFs rather than directly in underlying assets or companies. This strategy allows investors to gain diversified exposure across various alternative investment strategies and fund managers with a single investment, potentially reducing due diligence efforts for individual investors.

Category III AIFs: Complex Strategies and Short-Term Returns

Category III AIFs are funds that employ diverse or complex trading strategies and may employ leverage, including through investment in listed or unlisted derivatives. These funds are generally considered higher risk due to their aggressive strategies and use of leverage.

• Hedge Funds: Hedge Funds are known for their diverse and often complex trading strategies, which can include long-short equity, market neutral, arbitrage, global macro, and event-driven strategies. They frequently employ leverage (borrowing funds to amplify returns) and use derivatives (futures, options, swaps) for both hedging and speculative purposes. The objective of hedge funds is to generate absolute returns regardless of market direction, aiming for positive returns in both rising and falling markets. They typically have flexible investment mandates and higher fee structures.

Key Characteristics of Alternative Investment Funds (AIFs)

1. Lower Liquidity: AIFs generally have less liquidity, as their assets are often illiquid, requiring longer investment horizons.
2. Higher Risk Profile: AIFs tend to invest in higher-risk assets, such as private equity or distressed assets, with potential for higher returns.
3. Unique Fee Structures: AIFs typically charge management and performance fees, with structures like the common “2 and 20” model (2% management fee and 20% performance fee).
4. Complex Valuation: Valuation of AIF assets can be difficult due to the lack of publicly traded markets for assets like private equity or real estate.
5. Diverse Asset Classes: AIFs invest in a wide range of assets including private equity, real estate, hedge funds, and commodities.
6. Distinct Risk-Return Profiles: Depending on the strategy, AIFs offer varied risk-return profiles, from high-risk, high-return ventures to more stable investments.
7. Regulatory Framework: In India, AIFs are regulated by SEBI and classified into three categories, each with different investment strategies and regulatory requirements.

Key Investment Team

The key investment team of the Investment Manager of all AIFs have to comply with certain qualification conditions which are specified below:

Experience	Minimum 1 key person to obtain certification from the NISM by passing the NISM Series-XIX-C: Alternative Investment Fund Managers Certification Examination Refer Annexure 1 separately for details on NISM examination
Educational Qualification	Minimum 1 key person with professional qualification in any of the below from a university or an institution recognized by Central Government or any State Government or a foreign university – – Finance – Accountancy – Business management – Commerce – Economics – Capital markets or  – Banking  – CFA charter from the CFA institute

Table 3: Criteria for Key Investment Team

Note: NISM has announced the introduction of separate certification exams for AIF Managers, set to begin on May 1, 2025. These exams will be tailored to specific AIF categories (i.e., Series-XIX-D for Category I / II AIFs and Series-XIX-E for Category III AIFs). However, SEBI has not yet provided any updates regarding this new certification framework. The experience and education qualification criteria may be satisfied by the same person.

Taxation of Alternative Investment Funds (AIFs)

Category I and II AIFs: Pass-Through Status

Category I and II AIFs are granted pass-through status from an income-tax perspective, whereby any income earned by these AIFs (other than profits or gains from business) is not taxed at the AIF level, but directly taxed as income at the hands of the investors as if these investors had directly received this income from the investments.

Unabsorbed losses (other than business losses) of the AIF may be allocated to the investors for them to set off against their respective individual incomes, subject to such investors having held the units in the AIF for at least 12 months. 

Further, the distributions from Category I and II AIFs are subject to a withholding tax of 10% in the case of resident investors, and at the rates in force in the case of non-resident investors (after giving due consideration to any benefit available to them under the applicable tax treaty).

The Finance Act, 2025 has introduced a clarificatory amendment to the definition of ‘capital asset’ by expressly including investments made by Category I and II AIFs. This amendment resolves the long-standing ambiguity regarding the characterization of income clarifying that gains from investments made by Category I and II AIF shall be taxable under the head ‘Capital Gains’.

• Income Taxed at Investor Level: Capital gains, dividends, and interest income are passed through and taxed in the investor’s hands.
• Exception: Business Income: Any income classified as “profits and gains from business or profession” is taxed at the AIF level (at corporate rates for companies/LLPs or the Maximum Marginal Rate (MMR) for trusts).
• Unabsorbed Losses: Business losses are retained by the AIF and can be carried forward at the fund level.
• Withholding Tax (TDS): AIFs typically deduct 10% TDS on passed-through income for resident investors, while in case of non-resident investors, it is as per DTAA.

Category III AIFs : Non-Pass-Through Status

Category III AIFs have not been granted statutory pass-through status. Typically, they are set up as “determinate and irrevocable trusts.” This means the trusts have identifiable beneficiaries, and their respective beneficial interests can be determined at any given time. In such trusts, the trustee can discharge the tax obligation for the income of the trust on behalf of its beneficiaries (i.e., the investors) in a representative capacity. This is similar to the tax liability an investor would face if they had received the income directly. However, there’s an exception: trusts with any business income must pay tax at the MMR i.e., 39% where the trust pays tax under the new regime. As per income-tax law, tax authorities can recover tax either from the trustee or directly from the beneficiaries. Given this flexibility, a trustee might opt to pay the entire tax amount at the AIF level. Moreover, the law permits the trustee (acting as a representative assessee) to recover from investors any taxes it has paid on their behalf.

• Fund Pays Tax: All income (capital gains, interest, dividends, business income) earned by a Category III AIF is taxed at the fund level.
• Tax Rate: Often, particularly if structured as a trust, this income is taxed at the Maximum Marginal Rate (MMR) (depending on the nature of income).
• Distributions to Investor: Since tax is already paid at the fund level, distributions received by investors from Category III AIFs are generally tax-exempt in their hands. The tax can be collected from the trustee or, in certain circumstances, directly from the investor.

We have not covered tax implications for investment managers and sponsor entities above.

Key Documents

Private Placement Memorandum (PPM):

The PPM provides comprehensive details about the AIF. Contents include information about the manager, key investment team, targeted investors, proposed fees and expenses, scheme tenure, redemption conditions or limits, investment strategy, risk factors and management, conflict of interest procedures, disciplinary history, service terms and conditions by the manager, affiliations with intermediaries, winding up procedures, and any other relevant details helping investors make informed decisions about investing in an AIF scheme.

SEBI has introduced mandatory templates for PPMs (for and) which provides for two parts: 

• Part A – section for minimum disclosures
• Part B – supplementary section to allow full flexibility to the AIF in order to provide any additional information, which it may deem fit. 

There are two templates – one for Category I and II AIFs and the other for Category III AIFs. 

Angel Funds, LVFs and AIFs in which each investor commits to a minimum capital contribution of INR 70 crores are exempted from following the aforementioned template.

Indenture of Trust / Trust Deed:

This document is an agreement between the settlor and the trustee. It involves the settlor transferring an initial settlement (can be nominal) to the trustee to create the fund’s assets. The Indenture details the roles and responsibilities of the trustee. 

Investment Management Agreement:

This agreement is entered between the trustee and the investment manager. Here, the trustee designates the investment manager and transfers most of its management powers regarding the fund to them. However, certain powers retained by the trustee are outlined in the Indenture of Trust.

Contribution Agreement:

This agreement is between the contributor (investor), the trustee, and the investment manager. It mentions the terms of an investor’s participation in the fund, covering areas like beneficial interest computation, distribution mechanism, expense list to be borne by the fund, and the investment committee’s powers. SEBI mandates that the Contribution Agreement’s terms should align with the PPM and shouldn’t exceed its provisions.

Tenure and Listing of Alternative Investment Funds / Schemes

Understanding the tenure and liquidity aspects of AIFs is crucial for investors, as it dictates the duration of their capital commitment and the ease with which they can exit an investment.

Fund Tenure and Structure

The tenure of an Alternative Investment Fund, or its individual schemes, varies based on its category:

• Category I and Category II AIFs: These funds are typically structured as close-ended schemes. This means they have a predetermined lifespan.
  
  • Minimum Tenure: The regulations stipulate a minimum tenure of three years from the date of final closing of the scheme.
  • Extension: The tenure can be extended, generally by a maximum of two years, provided there is investor consent (usually requiring approval from a specified percentage, often two-thirds, of unit holders by value). This extension allows the fund manager more time to achieve investment objectives or liquidate assets optimally.
• Category III AIFs: Unlike Categories I and II, Category III AIFs offer more flexibility in their structure. They can be either open-ended or close-ended.
  
  • Open-ended Category III AIFs allow investors to enter and exit at various points, subject to the fund’s terms and conditions (e.g., specific redemption windows, lock-in periods).
  • Close-ended Category III AIFs operate similarly to Category I and II in terms of fixed tenure, often with a minimum of three years if structured as such. The choice between open-ended and close-ended depends on the fund’s investment strategy and the nature of its underlying assets.

Listing of AIF Units on Stock Exchanges

While AIFs are primarily private investment vehicles, SEBI regulations permit the optional listing of AIF units on recognized stock exchanges. This provision aims to offer a potential avenue for liquidity to investors.

• Optional Listing: Fund managers may choose to list the units of their AIF schemes on an exchange, but it is not mandatory. This decision is often influenced by investor demand and the fund’s strategy.
• Minimum Tradable Lot: For any listed AIF units, the minimum tradable lot is stipulated at ₹1 crore (Rupees One Crore). This ensures that trading remains restricted to sophisticated investors, aligning with the nature of AIFs.
• Reality of Limited Liquidity: Despite the option for listing, it’s crucial for investors to understand the reality of limited liquidity for AIF units on stock exchanges.
  • Thin Trading Volumes: AIF units, even when listed, often experience thin trading volumes compared to mainstream equities or mutual funds. This is due to the nature of their underlying illiquid assets, the limited number of eligible sophisticated buyers and sellers, and the long-term investment horizon of many AIF investors.
  • Investor Base: The investor base for AIFs primarily consists of HNIs and institutional investors, who typically have a longer investment horizon and are not engaged in frequent trading. This further contributes to lower trading activity.
  • Impact on Exit: Consequently, while listing provides a theoretical exit route, actually selling units at a fair price and in a timely manner can be challenging. Investors should primarily view AIFs as long-term, illiquid investments and not rely on exchange listing for immediate or easy exit liquidity.

How to get registered with SEBI?

To register an AIF with SEBI, the fund needs to make an application to SEBI on its online portal. 

The trust deed i.e. incorporation document of the fund where it is set up as a trust, needs to be registered with the local authorities. Further, the PAN needs to be obtained before making the application to SEBI.

The application to SEBI has the following key documents to be submitted:

• Application form in Form A 
• Private Placement Memorandum (PPM)
• Trust Deed
• Declarations and KYC documents of the entities involved i.e. investment manager, sponsor, trustee (if the AIF is structured as a trust), and the AIF itself

Further, before submitting the application to SEBI, the AIF must engage a merchant banker who performs due diligence on the PPM and subsequently provides a certification that needs to be filed with SEBI. However, there’s an exemption for LVFs and Angel Funds for this requirement. 

Once the application is submitted, SEBI will evaluate the application. Generally, the entire AIF setup and registration process, including SEBI’s assessment, spans around four to six months.

Broadly, the process flow looks as follows:

AIF Process Flow

Who Can Invest in an AIF?”:

• Beyond HNIs/UHNIs, explicitly state eligibility for Resident Indians, NRIs, and foreign nationals. Include precise minimum investment limits (Rs. 1 crore for investors, Rs. 25 lakh for employees/directors) and the maximum investor cap (1,000, except Angel Funds at 49).  
• AIFs are “Not for Retail Investors” due to their inherent high risk, substantial costs, and lock-in period constraints.

Factors to Consider Before Investing in AIFs

Investing in Alternative Investment Funds (AIFs) requires careful consideration due to their unique nature. Before investing, assess these critical factors:

• Risk Appetite and Tolerance: AIFs generally carry higher risk due to illiquid assets, early-stage investments, or complex strategies. Ensure your comfort with potential capital loss and volatility aligns with the AIF’s profile.
• Investment Horizon: AIFs typically involve long lock-in periods (often 3-7+ years). Confirm your financial goals allow for this extended capital commitment.
• Minimum Investment Requirement: Most AIFs mandate a minimum investment of ₹1 crore (or ₹25 lakh for Angel Funds). Ensure you meet this substantial entry barrier comfortably.
• Fund Manager’s Expertise: The fund’s success hinges on the manager’s experience, track record, and specialized knowledge. Thoroughly research their performance, strategy, and team.
• Liquidity Constraints: AIFs invest in illiquid assets. Even if listed, the ₹1 crore minimum tradable lot and thin trading volumes mean liquidity is severely limited. Do not rely on quick exits.
• Regulatory and Tax Implications: Understand the specific SEBI regulations and the tax treatment (pass-through for Cat I & II, non-pass-through/MMR for Cat III) to gauge post-tax returns and compliance.

Final Thoughts

With their ability to diversify investment portfolios and provide potential high returns, AIFs undeniably present an attractive avenue for investment in today’s dynamic market scenario.The regulatory framework, set by SEBI, ensures transparency, credibility, and alignment with global best practices, further instilling confidence among stakeholders.types

However, AIFs can be tricky to understand because of the different types, how they are taxed, and the many documents involved. It’s like trying to put together a puzzle with lots of pieces.

For both potential AIF managers and investors, understanding this intricate ecosystem is crucial. It is recommended to talk to experts who know the details. They can guide you through the process, help you understand the rules, and make sure you’re making the best decisions. As the world of AIFs keeps changing, staying informed and getting the right advice will be key to success.

Annexure 1 – Details of NISM Examination

Key Parameters	Details
Curriculum Overview	Investment landscape, modern portfolio theory, and fund management principlesAIF structures, performance benchmarking, investor due diligence, and legal frameworksKey regulatory frameworks, including SEBI (AIF) Regulations, FEMA, PMLA, SEBI (PIT), and SEBI (PFUTP)
Exam Details	90 multiple-choice questions (1 mark each) covering concepts, regulations, and calculations6 case-based questions (5 sub-questions each, 2 marks per sub-question) testing real-world fund management scenariosNegative marking applies Duration: 3 hours Passing score: 60% (90/150)Exam Fee: INR 3,000Validity: 3 years from the date of passing
Registration link	NISM examination registration

Need Expert Guidance in Setting up AIF?

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Reach out to us today and ensure your AIF investment strategies are aligned with the latest regulations and market trends.

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References: 

1. [1]  SEBI Bulletin – May 2025 – https://www.sebi.gov.in/reports-and-statistics/publications/may-2025/sebi-bulletin-may-2025_94245.html ↩︎
2. [2]  According to the ‘Data relating to activities of Alternative Investment Funds (AIFs)’ by SEBI ↩︎
3. [3]  https://aifpms.com/blog/growth-of-aif-pms-investments-in-india/ ↩︎
4. [4]  India goes Alternatives report by Avendus published in December 2024 ↩︎
5. [5]  Crisil intelligence and oister global report on AIFs published in January 2025 ↩︎