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AIFs are designed for those who tin grip higher volatility and illiquidity successful pursuit of perchance outsized returns. Mutual Funds, connected nan different hand, are built for broad-based participation, offering regulated, transparent, and lower-risk entree to superior markets.
AIFs are privately pooled finance vehicles that cod costs from precocious net-worth individuals (HNIs) aliases organization investors to put successful replacement plus classes specified arsenic backstage equity, hedge funds, task capital, aliases system credit.
When it comes to building wealth, investors often look nan prime betwixt Alternative Investment Funds (AIFs) and Mutual Funds. While some are pooled finance vehicles, they disagree importantly successful structure, accessibility, risk, and transparency.
CA Nitin Kaushik, successful a station connected societal media level X, noted that atech master pinch a nett worthy successful crores was sounded a flashy Alternative Investment Fund (AIF) by a backstage wealthiness head — deliberation pre-IPO startups, exclusive access, precocious alpha. Impressed by nan exclusivity, he parked ₹1 crore into nan AIF.
Four years later? That portfolio is down 6%.
On nan side, he had a humble Rs 25,000/month SIP moving successful communal funds. No fanfare, conscionable dependable investing.
That SIP? It’s up 65% — liquid, transparent, and dispersed crossed well-researched, diversified assets.
1 Cr Gone. 25K Grew. Welcome to nan Irony of Investing.
Met a tech professional. Net worthy successful crores.
Invested ₹1 Cr successful a flashy AIF sounded by a backstage wealthiness manager.
“Pre-IPO startups, exclusive access, precocious alpha” — nan works.
4 years later?
Portfolio down 6%.
Meanwhile,…
Mutual costs are regulated finance schemes unfastened to nan wide public. Managed by master money managers, they excavation money from unit and organization investors to put successful equities, debt, aliases a operation of both. With minimum investments arsenic debased arsenic ₹500, communal costs are known for their liquidity, diversification, and transparency. Daily Net Asset Value (NAV) updates and regular portfolio disclosures connection investors a clear position of their holdings. Mutual costs are governed by SEBI nether a strict regulatory framework, keeping investor liking astatine nan center.
AIFs, connected nan different hand, are exclusive finance vehicles aimed astatine precocious net-worth individuals (HNIs) and organization investors. With a minimum introduction of Rs 1 crore, AIFs put successful analyzable assets for illustration backstage equity, task capital, hedge strategies, and pre-IPO companies. They are often sounded arsenic offering "exclusive access" and "high alpha," but travel pinch higher risk, constricted liquidity, and higher costs. Most AIFs travel a 2-and-20 interest exemplary — 2% guidance interest positive 20% connected profits supra a benchmark — and often person multi-year lock-in periods.
In practice, while AIFs tin present precocious returns, they are besides prone to underperformance owed to illiquidity and concentrated bets. Meanwhile, communal costs person consistently shown strong, risk-adjusted returns complete time, particularly for semipermanent investors.
AIF vs Mutual Funds: Key Differences
| Minimum Investment | Rs 1 crore | As debased arsenic Rs 500 |
| Liquidity | Locked-in / illiquid | High liquidity |
| Transparency | Limited | Regulated, precocious disclosure norms |
| Fees | High (2/20 model, capacity fee) | Lower disbursal ratio |
| Diversification | Often concentrated | Broadly diversified |
| Performance | Uncertain, high-risk bets | Market-linked, historically consistent |
Performance Comparison: AIFs vs. Mutual Funds
| Top Performing AIFs (e.g., Aequitas Equity Scheme 1) |
Up to 70% | Up to 34.3% (e.g., Abakkus Emerging Opportunities Fund 1) |
| Top Performing Mutual Funds (e.g., Nippon India Growth Fund) |
Up to 24.06% | Up to 33.78% (e.g., Nippon India Growth Fund) |
While AIFs tin connection awesome returns, particularly successful niche aliases replacement plus classes, they travel pinch higher risks, constricted liquidity, and are suitable for investors pinch a higher consequence appetite and longer finance horizon. On nan different hand, communal costs supply a much accessible, transparent, and diversified finance avenue suitable for a broader investor base.
Investors should align their finance choices pinch their financial goals, consequence tolerance, and finance horizon.
Published on: Apr 22, 2025 2:41 PM IST
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