Glossary of Alternative Investment Fund terms

38 terms used in India’s SEBI-regulated Alternative Investment Fund industry. Where a definition rests on a regulation or circular, that instrument is named.

1,000-investor cap: An AIF scheme may not have more than 1,000 investors, a limit that keeps it a private placement rather than a public offer. Angel funds are subject to a separate regime. Accredited investors are excluded from the count in Accredited Investors Only AIFs.
Accredited Investor: An accredited investor is one recognised by a SEBI-empanelled accreditation agency as meeting prescribed income or net-worth thresholds. Accreditation gives access to products and relaxations not open to other investors, including Accredited Investors Only AIFs and reduced minimum-investment requirements in large value funds.
Accredited Investors Only AIF: An Accredited Investors Only AIF is a fund class in which every investor is an accredited investor. Created by SEBI on 18 November 2025, it carries several relaxations: exemption from the 1,000-investor cap, a NISM certification waiver for the investment team, and the manager may act as trustee.
AIF benchmark: An AIF benchmark is an aggregate, category-level performance series published by a SEBI-mandated benchmarking agency — NSE Indices and CRISIL — computed post-expense, pre-carry and pre-tax across the schemes that report to it. It describes how a category performed. It does not disclose the performance of any individual fund.
AIF distributor commission: Since 1 May 2023, Category III AIFs must pay distributors on an all-trail basis with no upfront commission, paid out of the management fee. Categories I and II may pay up to one-third of the total distribution fee upfront, the remainder on equal trail across the fund’s tenure.
AIF registration number: A SEBI AIF registration number takes the form IN/AIF{1,2,3}/{financial year}/{serial}, for example IN/AIF2/23-24/1234. The digit after AIF gives the fund’s category, the middle segment gives the financial year of registration, and the last is a serial within that year.
Alternative Investment Fund (AIF): An Alternative Investment Fund is a privately pooled investment vehicle registered with SEBI that collects money from investors to invest under a defined policy. It covers venture capital, private equity, debt and hedge-style strategies, and excludes mutual funds and collective investment schemes, which are regulated separately.
Angel fund: An angel fund is a sub-category of Category I venture capital fund that raises money from angel investors to back early-stage startups. It operates under a distinct regime within the AIF Regulations, with its own investor eligibility, investment size and lock-in requirements.
Capital commitment: A capital commitment is the total amount an investor contractually agrees to provide a fund over its life. It is not paid at once. The manager draws it down in instalments as investments are made, so committed capital and invested capital are different figures and SEBI reports them separately.
Category I AIF: A Category I AIF invests in sectors the government or regulators consider socially or economically desirable. It covers venture capital funds, angel funds, SME funds, social impact funds, infrastructure funds and special situation funds. Category I funds are close-ended and may receive incentives or concessions not available to other categories.
Category II AIF: A Category II AIF is one that is neither Category I nor Category III and does not undertake leverage other than to meet day-to-day operational requirements. Private equity funds and debt funds sit here. It is by far the largest category of Indian AIF by commitments raised.
Category III AIF: A Category III AIF employs diverse or complex trading strategies and may use leverage, including through listed or unlisted derivatives. Long-short and other hedge-style funds sit here. Category III funds may be open-ended or close-ended and are taxed at the fund level, unlike Categories I and II.
Close-ended fund: A close-ended fund has a fixed tenure stated at launch, and investors cannot redeem before it ends, though the tenure may be extended with investor consent. Category I and Category II AIFs must be close-ended. The structure suits illiquid assets that need years to realise.
Commitments raised: Commitments raised is the total capital investors have contractually agreed to provide a fund, whether or not it has been called. SEBI reports it quarterly for each AIF category. It is the headline measure of industry size and is always larger than funds actually raised or invested.
Concentration limit: A concentration limit caps how much of a fund’s corpus may go into a single investee company. The standard cap for AIFs is 25 percent. Large value funds may invest up to 50 percent in one investee, a relaxation SEBI introduced in its third amendment of 18 November 2025.
Direct plan: A direct plan lets an investor subscribe to an AIF without going through a distributor, and without bearing distribution commission. SEBI made direct plans mandatory for AIFs with effect from 1 May 2023, alongside the rules restructuring how distributors may be paid.
Drawdown (capital call): A drawdown is a manager’s request that investors pay in part of their committed capital, usually to fund a specific investment or cover fees. Investors are contractually obliged to meet it within the notice period. Failure to do so triggers default provisions set out in the fund documents.
Funds raised: Funds raised is the capital investors have actually paid into a fund, as distinct from what they have committed. SEBI reports it net and quarterly by AIF category. Comparing funds raised with commitments raised shows how much of the industry’s committed capital has been called.
GARUDA mechanism: GARUDA lets an AIF launch a regular scheme ten working days after filing its placement memorandum with SEBI, unless SEBI advises otherwise, with a SEBI-registered merchant banker certifying the disclosures instead of SEBI issuing comments. Accredited-investor-only funds, large value funds and angel funds launch immediately on filing.
GIFT City AIF: A GIFT City AIF is a fund set up in the International Financial Services Centre at GIFT City, Gujarat, regulated by the IFSC Authority rather than under SEBI’s domestic AIF regime. The structure is used mainly to pool foreign capital for investment into and out of India.
Internal Rate of Return (IRR): Internal rate of return is the annualised discount rate at which a fund’s cash flows net to zero. It is the standard performance measure for close-ended funds because it accounts for the timing of drawdowns and distributions. Indian AIFs do not publish IRR in any standardised public form.
Investment manager: The investment manager is the entity appointed to make and manage a fund’s investments under its stated strategy. SEBI’s register of AIFs does not carry a manager field, which is why manager and sponsor relationships shown on this site are derived from registration records rather than published by SEBI.
Investments made: Investments made is the capital an AIF has deployed into portfolio assets, reported net by SEBI each quarter for each category. It is the narrowest of SEBI’s three headline measures, sitting below funds raised, which in turn sits below commitments raised.
Large Value Fund (LVF): A large value fund is an AIF, or a scheme of one, in which each investor is an accredited investor committing at least ₹25 crore. SEBI reduced that threshold from ₹70 crore on 18 November 2025. Large value funds receive relaxations including a higher single-investee concentration limit.
Leverage: Leverage is exposure taken beyond a fund’s own capital, through borrowing or derivatives. Category II AIFs may not use it except for short-term operational needs. Category III AIFs may use leverage subject to SEBI limits and disclosure, which is the defining difference between the two categories.
Merchant banker (AIF filing): A SEBI-registered merchant banker files an AIF’s private placement memorandum with SEBI and independently certifies that its disclosures are true, fair and adequate. It may not be an associate of the AIF, its sponsor, manager or trustee, and its name is disclosed in the memorandum.
Minimum investment in an AIF: The minimum investment in a SEBI-registered AIF is ₹1 crore for most investors. Employees and directors of the fund, and of its manager, may invest ₹25 lakh. Large value funds for accredited investors require ₹25 crore per investor, reduced from ₹70 crore by SEBI on 18 November 2025.
Net Asset Value (NAV): Net asset value is the value of a fund’s assets less its liabilities, usually expressed per unit. Mutual funds publish NAV daily. AIFs report it to their own investors under the terms of their fund documents, and no public, standardised NAV series exists for Indian AIFs.
Open-ended fund: An open-ended fund allows subscriptions and redemptions during its life rather than locking capital for a fixed tenure. Among AIFs only Category III may be open-ended, which reflects that its strategies typically hold liquid, tradable instruments.
Perpetual validity: A registration marked perpetual has no scheduled expiry date, and remains in force until surrendered or cancelled. Almost every AIF on SEBI’s current register carries perpetual validity, so the validity field rarely distinguishes one fund from another.
Portfolio Management Service (PMS): A portfolio management service manages securities for a client in a separate account rather than a pooled vehicle, with a ₹50 lakh minimum. Unlike AIFs, PMS performance is publicly comparable because APMI requires monthly disclosure. That disclosure difference is the main reason AIFs cannot be ranked by return.
Private equity: Private equity is investment in the equity of companies that are not publicly traded, typically taking significant stakes and holding for several years. In India most private equity funds register as Category II AIFs, which is one reason Category II dominates the industry by commitments raised.
Private Placement Memorandum (PPM): A private placement memorandum is the offer document an AIF gives prospective investors, setting out strategy, terms, fees, risks and conflicts. SEBI prescribes a template for most funds and requires filing through a merchant banker. A PPM is not a public document, which is why AIF terms are not publicly comparable.
Specialized Investment Fund (SIF): A Specialized Investment Fund is established by a registered mutual fund under Chapter VI-C of the SEBI (Mutual Funds) Regulations, 1996. It offers long-short equity and debt strategies in listed instruments, with a minimum investment of ₹10 lakh per PAN across all its strategies and a published net asset value. It is not an Alternative Investment Fund.
Sponsor: The sponsor is the person or entity that sets up an AIF, and is required to maintain a continuing interest in the fund so that its incentives align with investors’. SEBI’s public register records the fund, not its sponsor, so sponsor relationships must be established from other sources.
Trustee: Where an AIF is set up as a trust, the trustee holds its assets for the benefit of investors and oversees the manager’s compliance with the trust deed and regulations. Since November 2025, the manager of an Accredited Investors Only AIF may itself act as trustee.
Venture capital fund: A venture capital fund is a Category I AIF that invests in early-stage and growth-stage unlisted companies. In SEBI’s quarterly statistics it is reported separately from angel funds, and the two together make up the largest part of Category I by commitments raised.
Why AIF performance is not public: Indian AIF performance is not public fund by fund, but it is not unmeasured either. Chapter 22 of SEBI’s Master Circular for AIFs makes benchmarking mandatory: every AIF, for each scheme more than a year past its first close, must report scheme-wise valuation and cash-flow data half-yearly to a benchmarking agency appointed by an industry association. IVCA has appointed CRISIL, NSE Indices and Preqin. The agreement covering that data governs confidentiality, and what reaches the public is category and sub-category benchmarks, computed post-expense, pre-carry and pre-tax: SEBI requires the industry benchmarks to be disseminated in a manner accessible to the public, and headline tables are free on the agencies’ websites, while the full Benchmark Report is supplied on request. A fund’s own performance-versus-benchmark report must accompany any past performance it shows in its private placement memorandum or in any marketing material, which means prospective and current investors see it and nobody else does. Angel funds report to the agencies too, from FY 2025-26. So standardised performance data exists; comparable per-fund NAV, IRR or returns are simply not published. Source: SEBI Master Circular for AIFs of 3 June 2026, Chapter 22, originally circular SEBI/HO/IMD/DF6/CIR/P/2020/24 dated 5 February 2020.