How to set up an alternative investment fund? (2024)

How do I set up an alternative investment fund?

Original Deed of Trust in case of the AIF registration is by a society or trust registered under the Trusts Act, 1882. Information of the directors and shareholders with respect to the AIF. Copy of the Placement Memorandum of the applicant entity. Contact information and other information of the applicant entity.

What is Alternative Investment Fund example?

An alternative investment is a financial asset that does not fit into the conventional equity/income/cash categories. Private equity or venture capital, hedge funds, real property, commodities, and tangible assets are all examples of alternative investments.

How much should you allocate to alternative investments?

A new study carried out by Dexia Asset Management shows the benefits of allocating 15% to 20% of a portfolio to alternative funds. Finding a good balance between risk and return is the first aim of any investment strategy.

What are the 4 main categories of alternative investments?

Alternative investments are supplemental strategies to traditional long-only positions in stocks, bonds, and cash. Alternative investments include investments in five main categories: hedge funds, private capital, natural resources, real estate, and infrastructure.

What is the difference between AIF and PMS?

However, PMS and AIF there are many points of difference between Portfolio Management Services and Alternative Investment Funds like AIF offers a wide bouquet of investments while on the other hand PMS is majorly focused on listed securities.

How is AIF different from mutual fund?

AIF's are the most flexible of the three investment vehicles, allowing for investments in unlisted shares, along with the use of leverage and shorting. This allows for AIF's to offer strategies of much higher levels of complexity, as compared to what is possible under PMS or Mutual Fund Structures.

What are the main types of investment alternatives?

Are AIF regulated?

The AIF Regulations stipulate that every AIF established or incorporated in India for the purpose of pooling capital from domestic or foreign investors (certain types of AIFs are excluded from registration such as ESOP trusts, family trusts, holding companies, securitization trusts, etc.) is to be compulsorily ...

Why are alternative investments important?

Alternative investments typically have a low correlation to more traditional asset classes, as discussed. Alternative assets therefore provide an opportunity for portfolio diversification, reducing overall risk exposure across investments. Many alternative assets also provide a hedge against inflation.

What are alternatives in asset allocation?

Alternative investments (known simply as “alternatives”) are investment strategies outside of traditional stocks, bonds and cash. Some common examples are private equity, venture capital, hedge funds, real estate, commodities and currencies.

How much of my portfolio should be in hedge funds?

Determining Asset Allocation

But the amount can vary substantially as his risk toler- ance changes (Display 8). If his tolerance for risk is very low—as indicated by an overall portfolio allocation of 80% to bonds with the rest in stocks—a 7% allocation to hedge funds might be the best course of action.

Are alternative investments safe?

Risks of Alternative Investments

Alternative investments are more complex than traditional investment vehicles. They often have higher fees associated with them. As with any investment, the potential for a higher return means higher risk.

What factors must be considered in choosing between investment alternatives?

Investors should look for the purchase price, purchase date, sale price, and sale date of each asset in the fund to determine the internal rate of return of the fund. Do not confuse fund with asset. A fund is generally made up of several assets which adds more diversification.

What are investment alternatives give details of any five?

Traditionally, alternative investments have included commodities, real estate, derivatives, and hedge funds. For 2022, while gold and property still make the list, we also consider owning a business and P2P lending.

What is Category 2 Alternative Investment Fund?

1. Category II AIFs are funds which 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 Regulations.

What is a Category 3 AIF?

Category III : Alternative Investment Funds such as hedge funds or funds which trade with a view to make short term returns or such other funds which are open ended and for which no specific incentives or concessions are given by the government or any other Regulator.

What is lock in period in AIF?

Close-ended units in AIFs have a lock-in period to which they must adhere. Categories. PMS are of two types; discretionary and non-discretionary based on the authority of the fund manager. On the other hand, AIFs are grouped into three – Category I, II, and III, depending on where the funds are invested.

What is AIF business income?

Business income, if any, is taxed in the hands of AIF at the maximum marginal tax rates applicable to such AIF as per the legal status of the AIF. Further, such business income would be exempt in the hands of the investor as per section 10(23FBB) of the Act.

What is AIF accounting?

Alternative Investment funds (AIF) are funds which invest in hedge funds, private equity, venture capital, angel fund, REITs and many such alternative investment vehicles. These are specifically made for high net worth investors with customized investment needs.

Are mutual funds alternative investment funds?

Alternative mutual funds (sometimes called alt funds or liquid alts) are publicly offered, SEC-registered mutual funds that hold non-traditional investments or use complex investment and trading strategies. Investors considering alt funds should be aware of their unique characteristics and risks.

Is a hedge fund an AIF?

AIF examples include; hedge funds, private equity funds, real estate funds and even (in the slightly more obscure areas of the market), funds formed to invest in rare coins or fine wines.

Can AIF give loans?

AIFs are Indian entities, and hence have more flexibility with respect to debt investment from an Indian regulatory perspective. However, AIFs are permitted to only invest in securities, and cannot have any direct loan exposure.

What is not included in alternate investment fund?

AIFs include private equity, venture capital, hedge fund, and angel fund etc. Also, AIFs don't come under the purview of Securities and Exchange Board of India SEBI mutual fund regulations. Investors who wish to diversify can choose Alternative Investment Funds to invest.

How are alternative investments regulated?

No, Alternative Investment Funds do not need to be licensed, authorised or regulated by any securities regulator but must be able to rely on an exception from registration as an investment company under the Investment Company Act of 1940.

What are the risks associated with AIF?

Risks that have to be monitored generally include market, credit, liquidity, counterparty and operational risks. To set up an effective risk-management framework for its AIFs, an AIFM has to understand the meaning and implications of the respective risks for each individual AIF.

How do I start a small hedge fund?

What is the ideal portfolio mix?

As a guide, the traditionally recommended allocation has long been 60% stocks and 40% bonds. However, with today's low return on bonds, some financial professionals suggest a new standard: 75% stocks and 25% bonds. But financial planner Adam acknowledges that can be more risk than many investors are prepared to take.

What is the 5 percent rule in investing?

The five percent rule, aka the 5% markup policy, is FINRA guidance that suggests brokers should not charge commissions on transactions that exceed 5%.

How do you make investment decisions?

What are 3 factors you should consider before investing your money?

What are some handy tips that we should consider regarding investments?

How do I start investing for beginners?

One of the best ways for beginners to get started investing in the stock market is to put money in an online investment account, which can then be used to invest in shares of stock or stock mutual funds. With many brokerage accounts, you can start investing for the price of a single share.

Which type of investment is best?