Alternative Investment Fund is a special investment category that differs from conventional investment instruments. It is a privately pooled fund. Generally, institutions and HNIs invest in AIFs as substantial investments are required.

These investment vehicles adhere to the SEBI (Alternative Investment Funds) Regulations, 2012. AIFs can be formed as a company, Limited Liability Partnership (LLP), trust, etc.

• 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.
• Alternative investment strategies are typically active, return-seeking strategies that also often have risk characteristics different from those of traditional long-only investments.
• Characteristics common to many alternative investments, when compared with traditional investments, include the following: lower liquidity, less regulation, lower transparency, higher fees, and limited and potentially problematic historical risk and return data.
• Alternative investments often have complex legal and tax considerations and may be highly leveraged.
• Alternative investments are attractive to investors because of the potential for portfolio diversification resulting in a higher risk-adjusted return for the portfolio.

• Alternative Investments may help in reducing volatility that is commonly associated with traditional investments as their performances are not dependent on the ups and downs of a stock market.
• Helps in diversification in terms of markets strategies and investment styles
• Strong potential in improving performance.