{"id":24529,"date":"2021-01-20T12:36:48","date_gmt":"2021-01-20T07:06:48","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=24529"},"modified":"2021-01-20T12:36:52","modified_gmt":"2021-01-20T07:06:52","slug":"growth-of-alternative-investment-funds-aif-in-an-indian-perspective","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/growth-of-alternative-investment-funds-aif-in-an-indian-perspective\/","title":{"rendered":"Growth of Alternative Investment Funds (AIF) in an Indian Perspective"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Alternative\nInvestment funds (AIF) in India are witnessing exponential growth since their\ninception in 2012. The number of investors in this sector is increasing every\npassing day. In this article, we would unfold some facts regarding the growth\nof Alternative Investment funds from India\u2019s perspective.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/growth-of-alternative-investment-funds-aif-in-an-indian-perspective\/#An_Overview_of_the_Growth_of_Alternative_Investment_Funds_in_Recent_Years\" >An Overview of the Growth of\nAlternative Investment Funds in Recent Years<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/growth-of-alternative-investment-funds-aif-in-an-indian-perspective\/#Outlook_on_Alternate_Investments_Funds_and_its_Various_Categories\" >Outlook on Alternate Investments\nFunds and its Various Categories<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/growth-of-alternative-investment-funds-aif-in-an-indian-perspective\/#Reasons_Pertaining_to_the_Sustainable_Growth_of_Alternative_Investment_in_India\" >Reasons Pertaining to the Sustainable Growth of\nAlternative Investment in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/growth-of-alternative-investment-funds-aif-in-an-indian-perspective\/#Viable_Strategies_to_Ensure_Substantial_in_Alternative_Investment_Funds_in_India\" >Viable Strategies to Ensure Substantial in Alternative\nInvestment Funds in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/growth-of-alternative-investment-funds-aif-in-an-indian-perspective\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"An_Overview_of_the_Growth_of_Alternative_Investment_Funds_in_Recent_Years\"><\/span>An Overview of the Growth of\nAlternative Investment Funds in Recent Years<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In the view of\nthe Global Limited Partner Survey held in 2017, our country secured top in\nranking and became the most preferred platform for alternative investment. This\nhas triggered the growth of new capital and broadened the scope of consumer\nprotection.<\/p>\n\n\n\n<p>Where the stock market has witnessed a significant decrease in investment with the fall of benchmark Sensex, <a href=\"https:\/\/corpbiz.io\/alternative-investment-fund-registration\"><strong>Alternative investment Funds<\/strong><\/a> are making a great buzz in our country. Additionaly, unlike mutual funds, AIF offers inculcation of hedging strategies.<\/p>\n\n\n\n<p>Owing to these reasons, Alternative Investment funds are likely to strengthen their position in the upcoming years.&nbsp;As per SEBI, the registered funds are consistently thriving for AIF every passing year and have reached 366 in 2018. Till Sep 2018, about 470+ AIF have obtained funds that have resulted in enhancing the efficacy of this volatile secondary market. This marks a considerable rise in the Indian economy at a faster pace.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Outlook_on_Alternate_Investments_Funds_and_its_Various_Categories\"><\/span>Outlook on Alternate Investments\nFunds and its Various Categories<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Outlook-on-Alternate-Investments-Funds-and-its-Various-Categories.png\" alt=\"Outlook on Alternate Investments Funds and its Various Categories\" class=\"wp-image-24543\" width=\"474\" height=\"480\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Outlook-on-Alternate-Investments-Funds-and-its-Various-Categories.png 985w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Outlook-on-Alternate-Investments-Funds-and-its-Various-Categories-296x300.png 296w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Outlook-on-Alternate-Investments-Funds-and-its-Various-Categories-768x777.png 768w\" sizes=\"(max-width: 474px) 100vw, 474px\" \/><\/figure><\/div>\n\n\n\n<p>Unlike\ntraditional investment methods, the Alternative Investment funds (AIF) resides\noutside the framework of SEBI\u2019s regulation meant for investment institutions.\nThey bear distinctive identities when compared with stocks, bonds, etc. Also,\nthey are perceived as private investment opportunities in general. These funds\nare categorized into the following classes, which are as follows:-<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Category I AIF<\/h3>\n\n\n\n<p>It encloses a class of the funds subjected to the investment in socially or economically ventures such as <em><strong>Social Venture Funds<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Social_venture_capital\"><em><strong>[1]<\/strong><\/em><\/a><\/sup>, Venture Capital Funds, SME funds, and Infrastructure Funds.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Category II AIF<\/h3>\n\n\n\n<p>It comprises\nfunds that are not part of Category I or Category III AIF. This investment is\ndone depending on the investment mandate, such as Debt funds and private equity\nfunds.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Category III AIF<\/h3>\n\n\n\n<p>It consolidates all the funds that have intricate and flexible investment strategies to ensure decent return, either by investment in Hedge funds or by the use of leverage.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/cbdt-amends-rule-12cb-related-to-investment-funds-under-section-115ub7\/\">CBDT Amends Rule 12CB related to Investment Funds under Section- 115UB(7)<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reasons_Pertaining_to_the_Sustainable_Growth_of_Alternative_Investment_in_India\"><\/span>Reasons Pertaining to the Sustainable Growth of\nAlternative Investment in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>There are wide arrays of factors that affect the growth of AIFs in our country, some of them are mentioned below:-<\/em><\/strong><\/p>\n\n\n\n<ol><li>The growing real estate sector has led to a whopping hike in the AIFs in our country. Also, in the year 2017, this sector was deemed to be second most active sector in India. The development of NIIF (National Infrastructure Investment Fund) of Rs 20,000 Crores by the government of India is one of the prominent factors due to the boost of AIFs.<\/li><li>Investors are more inclined towards Category III as they are allowed to invest in commodity derivatives until 10% of the investible funds. Not only this, but they are also permitted for taking advantage up to two times.&nbsp;<\/li><li>Since Nov 2015, the Reserve Bank of India has also rolled out a notification for the AIFs foreign investment under the automatic route. There are two things:&nbsp; First, there will be FDI limitation      applicable for AFIs if the individual who controls the fund is from the      Indian Territory.&nbsp; Second, if most of the AIF contains the overseas capital, it would be deemed local funds.<\/li><li>Deploying tax pass-through structure for the Category I and II funds.&nbsp;&nbsp;      This way, investors will be liable to address tax liabilities under      these categories and can easily avoid the trouble related to double      taxation.<\/li><\/ol>\n\n\n\n<p>However, there\nis still room for improvement to ensure long term growth stability.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Viable_Strategies_to_Ensure_Substantial_in_Alternative_Investment_Funds_in_India\"><\/span>Viable Strategies to Ensure Substantial in Alternative\nInvestment Funds in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Growth in AIFs\nalso acts as a key performance indicator for the Indian Economy. Therefore, it\nis compulsory to mitigate the loopholes by selecting suitable reforms so that\nthere can be a legitimate change in the AIFs structure of India.&nbsp;The\nfollowing section exhibits the suitable measures that must be considered to\nensure steady cash investment:-&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Garnering Local Institutional Investors for the Investment\nin AIFs<\/h3>\n\n\n\n<p>Currently, our\ncountry is more dependent on the overseas market for funds. If there was an\nincrease in local institutional investors, you will witness positive outcomes in\nthe growth of AIFs in India.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Essential Amendments to the Goods and Service Tax Framework<\/h3>\n\n\n\n<p><em><strong>The current GST framework must be incorporated with 2 changes, which are as follows:-<\/strong><\/em><\/p>\n\n\n\n<ul><li>For all investors who put up their funds in PE and VC funds, 5% of tax ought to be levied on services provided to these funds.&nbsp;<\/li><li>GST should be applied on overseas investments that surpassed 50% in AIFs as all the services that the Alternative Investment funds receive must be deemed as an export of services.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Growth-Oriented Taxation Reforms<\/h3>\n\n\n\n<p>Existing tax\nreforms for AIF sectors isn\u2019t favourable as it should be. Below we have\nmentioned some essential measures to cater to such an issue.&nbsp;<\/p>\n\n\n\n<ul><li>For Category III AIFs, there should be a Pass-through structure.&nbsp;<\/li><li>The transaction-related unlisted securities and profits should not be perceived as business gains. Rather it must be treated as capital gains. Besides, the expenses related to AIF management should be treated as improvement costs.&nbsp;<\/li><li>If the AIF ends up unprofitable, it must be set-off against the income of the investor rather than the business profits of AIFs.<\/li><li>Deployment of a Unit-based Taxation Approach must be done prior to the advent of AIFs under the stock exchange platform, such as mutual funds. The tax shall not be imposed on the investors of registered AIFs:<ul><li>Distribution tax should be applied on dividends as well as interest.<\/li><li>Capital gains tax should be brought into existence along with unit transfer for short and long-term capital gain.&nbsp;<\/li><li>Tax exemption should be accessible to an overseas investor for the generated income via an AIF in as IFSC.&nbsp;<\/li><\/ul><\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Alternative for Leverage on Category III Funds of Funds\n(FOF)<\/h3>\n\n\n\n<p>The FOF market\nin India is an initial stage of development when contrasted with the global\nscenario. Henceforth, it is imperative to render an alternative for taking\nleverage at the Fund of Fund or individual portfolio level.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Compulsory Disclosure of Fund-based Information<\/h3>\n\n\n\n<p>Imperative\ndetails regarding the fund performance must be shared with the investor.\nBesides, there must be an establishment of an Investment Advisory Committee\nthat shall play an important role in managing all the fund&#8217;s related conflicts\nin a better way.<\/p>\n\n\n\n<p>The aforesaid\nessential reforms will surely ensure the sustainable and long term growth of\nAIFs in India. Although the Alternative Investment Funds are still in the emerging\nstage, with such reforms in place, they will surely arrive at a good position\nin the coming years.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The growth in AIFs will surely have a sustainable future in the coming years. You will witness the increase in the investor&#8217;s numbers, which in turn leads to stimulate the growth of the Indian Economy. A great transformation is on its way that will ensure cut development in the AIF sector soon.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/alternative-investment-funds-and-popular-across-the-globe\/\">What are Alternative Investment Funds and why they are becoming increasingly popular across the Globe?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Alternative Investment funds (AIF) in India are witnessing exponential growth since their inception in 2012. The number of investors in this sector is increasing every passing day. In this article, we would unfold some facts regarding the growth of Alternative Investment funds from India\u2019s perspective. An Overview of the Growth of Alternative Investment Funds in [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":24545,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[160],"tags":[1448],"acf":{"service_id":"199"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":5898,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/24529"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=24529"}],"version-history":[{"count":7,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/24529\/revisions"}],"predecessor-version":[{"id":24548,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/24529\/revisions\/24548"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/24545"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=24529"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=24529"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=24529"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}