ALTERNATIVE INVESTMENT FUNDS

CA RUKMANI

INDEXATION• INTRODUCTION• STRATEGY of INVESTMENT• CATEGORIES• REGISTRATION PROCESS• STATISTICS of INVESTMENT• SILENT FEATURES OF INVESTMENT• DUE DILIGENCE• RISK IN INVESTMENT• CONCLUSION

INTRODUCTION• Anything alternate to the traditional form of

investment gets categorized as Alternate Investment.

• In short we can say other than Stock, Bond and Cash

Alternative Investment Strategy

Categories of AIFs

CATEGORY IINVESTMENT Primarily Invest in Startup Units or unlisted entities Etc.

Borrowing Allowed Only for Meeting Temporary Funding for limited period

Type of Funds Venture Capital Fund, Social Venture capital, SME Funds or Infrastructure Funds or other funds as notified

Type of Scheme Close Ended

Tenure 3 Years + 2 Years Extension

Limit Maximum 25 % in one Project

Capital Venture fund• A wealthy investor like bank invest their money into

long term growth companies. • It is highly risky investment because its done in the

startup level• Review the plan of the company.

Venture capital companies

• Show their plan to the Venture capital companies for fund

• In return of their Investment Company provide Venture capital stock as well as control over the management

• The valuation of the stock maturity period and other term and conditions are pre – decided.

A Small company/ Firms needs venture

fund

Social Venture Capital

• It is a form of Investment through Social Venture Capitalists In return to achieve a reasonable gain in financial return while delivering social Impact to the world

Investment Funding

• Debt Capital + capital ( Participation Right)• Secured with the Assets of the company

Investor Tax Relief

• Income Tax relief of 30 % + Exemption from Capital Gain at the time of Maturity

Social Venture Capital Firms

• Acumen Fund , Unitus Seed Funds, Grass roots Business funds etc.

SME FUNDS• Investment is this type of funds is a convenient

strategy for meting out the Challenges of Small and medium Enterprises market because its required a close follow up.

• Invest equity capital in private equity capital fund such as venture capital funds and other targeting for growth.

• Such Investment shall be lock for One year from the date of Investment.

• Investors Like : CASEIF II, Evolution One Fund Etc.

Infrastructure fund• Issued by non banking institution to develop the

infrastructure across the country.• Fixed Return having long term maturity period of 10 to

15 years.• Every investor need to keep at least five years for

getting tax benefits• Tradable in the market• In 2013-14, the RBI allowed to bank for issuing these

bonds but maturity upto 7 years and these bonds are exempted from the requirement of SLR and CRR.

• Top Infrastructure bonds are: IDFC Infrastructure Bonds L & T Infrastructure Bonds IDBI Flexi bonds IIFCL Long term Infrastructure Bonds IFCI Infrastructure Bonds

CATEGORY IIINVESTMENT Majorly In unlisted entities or units of CAT I or III

Borrowing Allowed Only for Meeting Temporary Funding for limited period

Type of Funds Private Equity or Debt Funds

Type of Scheme Close Ended

Tenure 3 Years + 2 Years Extension

Limit Maximum 25 % in one Project

Private Equity• Private Equity Structure– Three level• Private Equity Firms• Private Equity Funds• Private Equity Portfolio companiesPartnership Structure

General PartnerLimited PartnerLPA

CATEGORY IIIINVESTMENT Primarily In Securities of Listed or Unlisted Investee

Companies Derivatives or Complex Structured Products Borrowing Allowed Only for subject to consent of Investors and maximum

limit specified by BoardType of Funds Hedge Funds I.e. Derivaties

Type of Scheme Open or Close Ended

Tenure Close Ended : 3 Years + 2 Years Extension Open Ended : No Tenure

Limit Maximum 10 % in one Project

Registration under SEBI

Application Under Form A with

application fee of Rs. 1,00,000

Get Reply Within 21 days Subject to qualification

After Approval have to submit the

fees

For Category Ist Rs. 5,00,000 and for

others Rs. 1,00,000

Applicant get the Certificate as an

alternative investment Funds

Statistics of Investment

Jan14 to March14

April 14 to June14

July14 to Sep 14

Oct 14 to dec14

0

500

1000

1500

2000

2500

3000

3500

4000

4500

category Icategory IIcategory III

Figures in Crore asPer SEBI

Silent Features• Minimum Subscription would be Rs. 1

Crore or 0.01% of fund Raised.• Funds With Size Greater Than Rs. 500

Crore Would Need to have Custodian.• Maximum Number of Investors in the AIF

shall be 50• Winding Up Methodology need to be

explicitly Mentioned in the Prospectus. • No fund shall have Sub Funds Underlying.

Due Diligence Process

Structure of the Fund

Investment Strategy Review

Performance review

Risk Assessment

Administrative Review Legal review

Checking reference

Risk in InvestmentCredit and Liquidity risk

Benchmarking in Alternative Investments

Impact of Bias in the database

Dynamic and non- linear Dimensions

CONCLUSION• Investment can be made in a company,

LLP or Trust.• Tax Effective Structure can be planned to

avail tax benefits• May make investment whether in or

Outside India• Minimum Regulatory and disclosure

Requirement

Thank You