# Alternative Investment Funds (AIF) — Arthum Wealth Services

An AIF is a privately pooled vehicle registered with SEBI that raises capital from a limited set of sophisticated investors. Minimum commitment is **₹1 crore** per investor, and a scheme is capped at 1,000 investors.

## The three categories
- **Category I** — venture capital, angel, SME, infrastructure and social venture funds. Close-ended.
- **Category II** — private equity, private credit and debt funds, real-estate funds, funds-of-funds. The largest bucket in practice. Close-ended.
- **Category III** — long-short equity, absolute-return and hedge-fund-style strategies that may use leverage and derivatives. Open- or close-ended.

## What we help with
- Whether an AIF belongs in your portfolio at all, and at what percentage
- Matching category to objective — private credit for yield, venture for growth, long-short for lower drawdowns
- Reading the Private Placement Memorandum
- Drawdown structures and capital-call schedules
- Lock-in, fund tenure, extension clauses and exit options
- The full fee stack: management fee, carry, hurdle rate, catch-up, setup costs
- Taxation — Category I and II are generally tax pass-through; Category III is taxed at the fund level
- Tracking capital calls, distributions and portfolio updates through the fund's life

## What to understand before committing
1. Illiquidity is the deal, not a side effect — there is no reliable secondary market
2. Track records are short and self-selected; compare against the vintage
3. Fees compound against you — 2% plus 20% carry needs real alpha to beat an index fund
4. Concentration risk is real, especially in private credit
5. Reporting is quarterly at best, and valuations are estimates until an exit

## Who it's for
Investors whose core portfolio is built, who have surplus capital they will not need for 5–8 years, and who want return streams uncorrelated with listed equity.

*AIF investments are subject to market and credit risks, are illiquid, and carry no assurance of returns. Read the Private Placement Memorandum carefully before investing.*