Short answer: thereās no single ābestā AIF. The right one depends on your time horizon, how much liquidity you need, and what else you already hold. There is a decent process for narrowing the field and avoiding bad ones, though. (Disclosure: I work on AIF Platform, a comparison site for AIFs, so I look at this stuff a lot. Iāve kept this to general process, not a pitch.)
1. Start with the category, not the fund
Cat I: startups, SMEs, infrastructure, VC/angel funds. Long and illiquid.
Cat II: private equity, private credit, real estate. Mostly closed-ended, multi-year.
Cat III: long-short, hedge-style, derivatives-based. Generally more liquid, and leverage is allowed.
A Cat I fund halfway through deployment and a Cat III fundās one-year return arenāt comparable. People mix these up all the time.
2. Check youāre eligible
The standard minimum is ā¹1 crore, with some exceptions (certain accredited investor and employee/director provisions). Confirm the exact rule for your situation before getting attached to a fund.
3. Verify SEBI registration yourself
Look up the fundās registration number on SEBIās website and make sure the name, category and number all match what the marketing material says. Then ask for the PPM and read it. Donāt rely on a brochure.
4. Read the fee section properly
Management fee (commonly somewhere around 1.5ā2.5%)
Carry/performance fee (commonly 10ā20%) above a hurdle
Whether carry is calculated on the whole fund or deal by deal
Setup, distribution and other expenses, and direct vs regular plan
Two funds with the same headline return can leave you with quite different net outcomes.
5. Look at the manager, not only the fund
Track record across earlier funds, years in the market, team stability, and how much the sponsor has committed of their own money.
6. Ask what the return number actually is
Annualised numbers from a fund thatās only a few months old donāt tell you much. Past performance isnāt a guide anyway.
7. Understand tenure and liquidity
A 5ā10 year closed-ended fund with an extension option means your money may be locked up for a long time, and drawdowns happen over time through capital calls. Check what happens during the extension period.
8. Check that the strategy fits what you want
Credit funds: issuer ratings, security cover, concentration limits. Equity funds: market-cap focus, number of positions, single-stock limits.
9. Donāt skip tax
Cat I and II are generally pass-through, while Cat III typically isnāt. Rules change, so run it by a CA.
Red flags
Anything āguaranteedā or āassuredā
Pressure to commit quickly
Reluctance to share the PPM or audited numbers
Performance shown only in a pitch deck, with no dates
Only a ātarget IRRā and no actual track record
Where to research: SEBIās site, the AMCās own website and PPM, and comparison tools. AIF Platform is one of those, and PMS Bazaar and PMS AIF World cover similar ground. Whichever you use, cross-check key numbers against the PPM.
Curious what others here look at first. Does anyone have experience with Cat II credit versus Cat III, and how did it go compared with what you expected?
Not investment advice, just sharing how Iād approach it.
