1. FUNCTIONING OF AIFS

2. Fund raising activity
Creation of AIF entity Form of Trust / Co / LLP (majority trust)
Private Pooling of funds;
(PMS Regulations allow to accept fund or securities)
Signing of Contribution agreements & KYC
Investors can be only domestic :
Each scheme should have corpus of at least Rs. 20 Crore
Each Scheme – Maximum 1000 Investors
Investment less than Rs. 1 crore (employees / directors of AMC – 25 lacs). PE industry generally operates on inv commitments;

3. Fund raising terms IN pe
Hurdle Rate:
A minimum rate of return (e.g., 8–12%), which must be achieved before the fund manager can receive any carried interest payments.
Carried Interest:
A share of the profits of the fund's investments (typically up to 20%), paid to Fund Manager, as a performance incentive
Catch Up:
If Carried Interest is with Catch up – Investment Manager will get atleast X % above hurdle rate
Initial Closing: The first closing after which units will be accepted at Premium

4. REGULATIONS
Category I – Venture Capital (Start Ups) / SME / Social / Infra
Category II –
* Private equity or debt funds
* Primarily Unlisted;
* Cannot employ leverage – only for temporary funding requirements;
* Sponsor Commitment / Seed Capital – 2.5% or 5 Crore (less)
* Can only be closed ended–min 3 years tenure–extend upto 2 yrs (3/4 majority)
Category III –
* which employs diverse or complex trading strategies
* Sponsor Commitment / Seed Capital – 5% or 10 Crore (less)
* Can only be open ended or close ended:
* Can undertake leverage

5. REGULATIONS Private Placement Memorandum prepared
Filed before 30 days of launch on the Scheme
Catg I & Catg II – Max Inv 25% in a single company (on commitment amt)
Catg II – Max Inv 10% in a single company (on commitment amt)
Co-Investment by Manager of Sponsor shall not be on terms more favourable then to the Fund
Invest In Associates – approval of 75% of unitholders
Report leverage report to Custodian daily;

6. REGULATIONS
Appoint a Custodian if Fund size is more than Rs. 500 Crore
Catg I & Catg II AIF – Undertake valuation of Inv every six months
Category III – NAV quarterly for Cl. Ended and Monthly for Open Ended
Marketing Materials can be distributed on Private Placement Basis only;

7. FOREIGN INV IN / BY AIF’S
RBI has introduced Schedule 11 permitting foreign Investments;
Downstream investment shall be regarded as foreign investment if either the Sponsor / Investment Manager is not Indian ‘owned and controlled’ & need to follow FDI Policy norms;
Catg III AIF having foreign investment need to follow FPI norms;
FPI’s can only invest in Catg III AIF’s (upto 25% stake in AIF)
AIF’s can invest in equity of offshore unlisted Company which has presence in India, subject to SEBI approval (no RBI approval required), upto 25% of Investible Funds;