With reference to investments, consider the following:  

1. Bonds  
2. Hedge Funds  
3. Stocks   
4. Venture Capital 

How many of the above are treated as Alternative Investment Funds?   

• Only one 
• Only two 
• Only three 
• All the four 

Answer: (b) Only two 

Alternative Investment Funds (AIFs)

• Alternative Investment Funds (AIFs) are privately pooled investment vehicles that collect funds from sophisticated investors (Indian or foreign) to invest in non-traditional assets like private equity, hedge funds, real estate, and startups.
• Regulated by SEBI, they target high-net-worth individuals, requiring a minimum investment of ₹1 crore, and aim for higher returns through specialised, diversified strategies beyond standard stocks or bonds.
• As per the SEBI (Alternative Investment Funds) Regulations, 2012, an AIF can be set up as a trust, a company, a limited liability partnership, or a corporate body. SEBI has many Alternative Funds registered in the form of trusts.
• There are three types of Alternative Asset Funds:-
  • Category I: These funds invest in early-stage unlisted companies in the form of equity or debt (venture capital). These alternative asset funds can also invest in infrastructure-based projects or social ventures.
  • Category II: These types of funds invest in equity or debt of unlisted companies that are in mid or late stage of growth and are known as private equity or pre-IPO respectively.
  • Category III: This category of funds invests in the shares of listed companies. These alternative strategy funds can be for any period – long only or a combination of long and short.