Minimum Investment in Alternative Investment Funds (AIFs) — What Every Investor Should Know

Alternative Investment Funds (AIFs) have become a go-to option for investors seeking to diversify beyond traditional equity or debt instruments. They offer access to unique strategies — private equity, venture capital, hedge-style funds, and more — that were once limited to large institutions.

But before you invest, one important question arises — how much do you actually need to participate in an AIF?

Let’s break it down simply.

What Is the Minimum Investment Required in AIFs?

As per the Securities and Exchange Board of India (SEBI) AIF Regulations, 2012, investors must commit a minimum of ₹1 crore to participate in any AIF scheme.

For employees or directors of the AIF or its Manager, this threshold is relaxed to ₹25 lakh, recognizing their professional involvement and alignment with the fund’s strategy.

Note: The amount is the minimum commitment, not necessarily the initial cash outlay — it can be drawn down over time, depending on the fund structure.

Additionally, the minimum commitment may vary for every fundhouse. At Aequitas Investments, the minimum commitment to start with Indian Equity focused cat-3 AIF is INR 3 cr.

Why Does SEBI Set a Minimum Investment Limit?

The ₹1 crore threshold isn’t arbitrary — it serves specific purposes:

1. Investor Protection:
   AIFs invest in high-risk, less-liquid assets. The entry barrier ensures investors have the financial capacity and awareness to handle associated risks.
2. Market Discipline:
   Larger commitments attract investors who think long-term, preventing short-term speculation.
3. Operational Efficiency:
   Managing fewer, high-value investors reduces administrative complexity and enhances fund focus.
4. Strategic Filtering:
   It helps maintain exclusivity and ensures that investors share the fund’s vision and philosophy — a factor that often determines long-term success.

Category-Wise Snapshot of AIF Minimum Investment

Note: Employees/directors of the fund can invest from ₹25 lakh onwards.

Is ₹1 Crore the Only Barrier to Entry?

Not really. While ₹1 crore is the regulatory minimum, some premium funds — especially Category III — may set higher entry levels (₹3–5 crore) to maintain fund quality and investor alignment.

The minimum ticket size also reflects the strategy, risk appetite, and liquidity profile of each AIF.
For example:

• Private equity AIFs may have longer lock-ins (5–7 years).
• Category III AIFs may offer relatively shorter cycles but higher volatility.

So, it’s not just about affording the entry — it’s about understanding whether the fund suits your financial goals and risk comfort.

Aequitas’ Perspective: Beyond the Minimum Investment

At Aequitas, we believe the ₹1 crore threshold is more than a compliance rule — it’s a filter that encourages disciplined, goal-driven participation.

Our Category III AIF offerings are designed for investors who value transparency, strong risk management, and a research-backed approach to wealth creation.

While the entry ticket sets the bar, what truly matters is how effectively the capital is managed once it’s invested. That’s where expert fund management and alignment of philosophy make all the difference.

Key Takeaways

Minimum Investment: ₹1 crore (₹25 lakh for employees/directors)
Regulated by: SEBI (AIF Regulations, 2012).
Purpose: Ensures investor sophistication and fund stability.
Actual Entry May Vary: Depending on fund type and strategy.
Aequitas Insight: Focus beyond the threshold — towards long-term, disciplined capital growth.

Frequently Asked Questions

1. Can NRIs or FPIs invest in Indian AIFs?

Yes, subject to SEBI and FEMA compliance, NRIs, FPIs, and OCIs can invest in Indian AIFs.

2. Can I invest less than ₹1 crore in an AIF?

No, unless you are an employee or director of the AIF/Manager, the minimum commitment remains ₹1 crore.

3. Is there a lock-in period for AIFs?

Typically yes — depending on the category.

• Category I & II: Long-term lock-ins (5–7 years).
• Category III: May allow redemption or withdrawals based on fund structure.

4. How are AIFs different from PMS (Portfolio Management Services)?

While both cater to HNIs, PMS invests directly in listed securities, whereas AIFs can access unlisted opportunities or complex strategies. (You can explore our AIF vs PMS guide for detailed comparison.)

Final Thought

Alternative Investment Funds can be a rewarding addition to your portfolio — if chosen wisely.
Understanding the minimum investment requirement is just the starting point.
What matters next is selecting the right fund manager and aligning with a strategy that complements your long-term financial vision.

At Aequitas, we bring a decade of experience in navigating India’s public equity investment landscape with discipline, clarity, and conviction.