Alternative Investment Fund Regulated By Whom?

No matter how fruitful and lucrative an investment option sounds, regulations build the trust of the investors. If a particular thing is being regulated by a regulatory body, it gives the users assurance and they can be relaxed while putting their hard-earned money into it. So when it comes to AIF then Alternative Investment Fund regulated by whom?

Let’s dive in to know the detail. 

Who Regulates Alternative Investment Funds?

The regulatory body of the fund or any investment product makes it secure and thus easier for an investor to plan their investment. So here is the question, is the AIF fund regulated?

So here is the answer, like any other investment product, Alternative Investment Funds are regulated by the Securities and Exchange Board of India (SEBI) and they are registered with the board in order to be operational. 

Here are some of the regulations for all the types of alternative investment fund that were introduced in different years that help investors in knowing the detail of the fund.

AIF Regulations 2012 

On May 21, 2012, SEBI bought a regulations act which is also known as the Regulation act of SEBI, 2012 and it meant all the AIFs started being regulated by SEBI under SEBI Regulation 2(1) (b).

SEBI regulations allow the AIFs to take any form, be it a company, a trust, or an LLP (Limited Liability Partnership). 

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SEBI AIF Regulations 2021 Amendment 

Ever since SEBI brought this act in 2012, the AIF regulation act has gone under only one amendment that took place in May 2021 allowing the investors to be flexible as they can now associate themselves with the multiple AIF types depending upon the return, benefits, and AIF minimum investment requirement. 

Now, this amendment brought certain changes in the investing style of the fund. Here’s how?

Earlier while investing, the AIF had to choose from either an investee company or another AIF and that made them adhere to the guidelines of one category as FoF belonged to AIF category 2 while investing in the equity of other start-up companies is a part of both AIF category 1 and category 2 but since the amendment, now the AIF can choose to invest in both of them without having to follow just one category guideline given that it fulfils certain conditions. 

The second change this amendment made was the inclusion of NBFCs into venture capital undertaking as earlier it wasn’t a part of this category 1 investment. Earlier, venture capital undertaking included only goods or services or the manufacturing sector. 

A lot of people get confused on the point of whether AIFs are mutual funds or there is a difference. Well, there are quite a few differences actually between Alternative Investment Funds vs Mutual Funds. But let’s discuss that some other time.

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Conclusion

Summarizing this entire article, ever since SEBI came up with its regulatory act in 2012, investing in AIF has been quite safe in terms of its reliability since it is regulated by one of India’s primary regulatory bodies SEBI. 

With SEBI regulations, the AIFs have to follow certain guidelines and restrictions and the investors can be sure they are for their own benefit. 

However, it wasn’t the case always. Before the SEBI AIF regulations act, the AIFs used to lack practicality and there was no code of conduct since there was no regulatory body to regulate them.

These regulations have made AIF more viable even though there is no guarantee of investors booking huge profits or any profit at all. 

Therefore, it is recommended that private investors use their own assessment skills to set up an investment goal first and then act accordingly by pooling their funds into a suitable AIF. Also, you can avail the Portfolio Management Services to allocate funds in the right product. This needs to be remembered that there is a difference between AIF and PMS with these services having a different focus on the investor types too.

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