{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.indusind.com\/iblogs\/investment\/what-are-the-4-main-categories-of-alternative-investments\/#BlogPosting","mainEntityOfPage":"https:\/\/www.indusind.com\/iblogs\/investment\/what-are-the-4-main-categories-of-alternative-investments\/","headline":"What are the 4 Main Categories of Alternative Investments?","name":"What are the 4 Main Categories of Alternative Investments?","description":"The Alternative Investment Fund (AIF) industry has grown a massive seven times in the last five years. And they are becoming a preferred mode of investment for High Net Worth Individuals (HNI) (like you) who want risk-adjusted returns. The reason is simple. Unlike stocks and bonds, these investments have a low correlation with public markets....","datePublished":"2024-01-09","dateModified":"2024-09-12","author":{"@type":"Person","@id":"https:\/\/www.indusind.com\/iblogs\/author\/indusind\/#Person","name":"IndusInd Bank","url":"https:\/\/www.indusind.com\/iblogs\/author\/indusind\/","image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/8169561f34fb61e737060f1a537a86e2?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/8169561f34fb61e737060f1a537a86e2?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"IndusInd","logo":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","width":201,"height":86}},"image":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/investement.jpg","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/investement.jpg","height":400,"width":1060},"url":"https:\/\/www.indusind.com\/iblogs\/investment\/what-are-the-4-main-categories-of-alternative-investments\/","about":["Investment"],"wordCount":1158,"keywords":["Alternative Investment","Alternative Investment fund"],"articleBody":"The Alternative Investment Fund (AIF) industry has grown a massive seven times in the last five years. And they are becoming a preferred mode of investment for High Net Worth Individuals (HNI) (like you) who want risk-adjusted returns.The reason is simple. Unlike stocks and bonds, these investments have a low correlation with public markets. Besides, they are privately pooled funds that allow investing in several different asset classes at once. Naturally, investing in AIFs is an excellent idea if you\u2019re an HNI looking to invest large sums of money without considerable market risks.But you must know the AIF categories specified by the SEBI (Securities and Exchange Board of India) before you start investing. After all, you\u2019ll need to register in a particular category of funds to invest in them.Types of Alternative Investment Funds1. Category 1These pooled funds invest in businesses with high growth potential. Funds investing in start-ups, SMEs, and other economically viable businesses fall into this category. Since these are high-capital investments, they dramatically affect the country\u2019s economy. Naturally, investors receive incentives and concessions upon investing.Now, different types of pooled funds invest in different kinds of companies. Here\u2019s a better look.\u25cf  Venture Capital FundsThese pooled funds provide large financing to companies looking to get up and running. So, the funds invest in high-growth prospects like start-ups. Even so, companies fail all the time. This is why most HNIs that opt for Category 1 VC funding use the high-risk, high-return funding strategy when investing.\u25cf  Angel FundSimilar to Venture Capital Funds, Angel Funds invest in start-ups. The key difference being Angel Funds invest in start-ups that failed to receive funds from Venture Capital Funds. Again, investing in such start-ups comes with considerable risk. Fortunately, investors can start investing as little as Rs. 25 lakhs.\u25cf  Social Venture FundsSocial Venture Funds invest in businesses that positively improve the quality of life for people. These funds are known to offer reasonable returns, given the business would be profitable. They are a great investment mode for socially-conscious HNIs.\u25cf  Infrastructure FundsThese funds invest in companies involved in building infrastructure for the country. Such companies include companies building ports, railways, etc. Investors who want predictable returns typically invest in such companies through Category 1 funds.1. Category 2Category 2 AIF funds that invest in equity and debt securities. These include-\u25cf  Private Equity FundsThese funds invest in unlisted private companies by issuing debt and equity instruments. These funds come with some risk, given the funds are invested in securities of unlisted companies. Moreover, these funds have a lock-in period of 4-7 years. Even so, investors can exit the company after the set period after earning reasonable profits.\u25cf  Fund of FundsWhen investors invest in a fund of funds, they invest in a portfolio of other AIFs instead of choosing a single AIF category to invest in. Since the portfolio is diversified, investing in these funds comes with lesser risks.\u25cf  Debt FundsUnlisted companies with low credit scores release debt securities to raise funding. Investors can invest in such high-yield debt securities after considering the growth potential and the corporate practices of these firms.1. Category 3These funds offer short-term returns on investments through complex and diverse trading strategies. They include-\u25cf  Hedge FundsThese funds collect capital from accredited and institutional investors and make strategic investments in domestic and international markets to maximize returns. They are usually expensive and are accompanied by aggressive fund management.\u25cf  Private Investment in Public EquityHere publicly sourced funds are managed privately and are used for public equity investments. Investors typically buy shares of publicly traded stocks at a slashed price when investing.Over to YouNow that you know about the Alternative Investment Categories, you can start investing. Remember to properly understand the risks and returns associated with alternative investments before putting in your capital. Or use a wealth management service to help you figure it out.If you\u2019re an IndusInd Bank PIONEER account holder, you get access to personalized wealth management services at no extra cost. If you aren\u2019t a PIONEER account holder yet, you can apply online now! Visit our website to learn more.Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct\/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Share This:"}