Do alternative investments have a high return?
Alternative Investments Upside Proponents of alternatives in the portfolios of individual investors maintain they now have access to sophisticated investments and potentially higher returns that until relatively recently were only available to institutions, such as pension funds and foundations.
What qualifies as an alternative investment fund?
An alternative investment is a financial asset that does not fit into the conventional equity/income/cash categories. Private equity or venture capital, hedge funds, real property, commodities, and tangible assets are all examples of alternative investments.
What are the risks of AIF?
Risks that have to be monitored generally include market, credit, liquidity, counterparty and operational risks. To set up an effective risk-management framework for its AIFs, an AIFM has to understand the meaning and implications of the respective risks for each individual AIF.
What are the risks of alternative investments?
Risks of Alternative Investment Funds
- Low Liquidity. Unlike public equities, alternative assets are not traded publicly, meaning there is not an open market of buyers and sellers available to investors.
- Leveraged Portfolios.
- Fund Manager Risk.
- Valuation Risk.
- High Costs.
What are the benefits of AIF?
Advantages of AIF CAT III Fund
- Active Management.
- Long/Short allowed.
- Leverage up to 2X allowed.
- Participation in Equity downturns.
- Hedge Fund styles allowed.
- Quantitative algorithms allowed.
- Net lower correlation with benchmarks.
- Lower systematic risk vs benchmarks.
Why do people invest in alternative investments?
Alternative investments typically have a low correlation to more traditional asset classes, as discussed. Alternative assets therefore provide an opportunity for portfolio diversification, reducing overall risk exposure across investments. Many alternative assets also provide a hedge against inflation.
How do AIF funds work?
The term ‘alternative investment fund’ or ‘AIF’ refers to any vehicle established for the purpose of raising capital from a number of different investors with an aim to invest these funds into assets to generate favourable returns.
Can AIF give loans?
AIFs are Indian entities, and hence have more flexibility with respect to debt investment from an Indian regulatory perspective. However, AIFs are permitted to only invest in securities, and cannot have any direct loan exposure.
Who is the regulator for AIF?
Securities and Exchange Board of India
AIF’s are regulated by SEBI ( Securities and Exchange Board of India) and such ventures must get themself registered. The collection of the funds can only occur on a private basis and not a public call such as for the issue of shares. AIFs are regulated as per the Regulation Act of SEBI, 2012.
What are the disadvantages of AIF?
The biggest drawback of an AIF would surely be the high level of “fund manager risk” attached to it. Since an AIF takes multi directional calls, it’ll need to look beyond traditional valuation models or buy and hold strategies while making investment or trading decisions.
What are the risks associated with an alternative investment fund?
Below are some common types of risk that can be associated with alternative investments.
- LTV. The loan-to-value ratio is the ratio of a loan to the value of the financed asset.
- Default risk.
- Concentration risk vs.
- Liquidity risk.
- Uncertainty in timing.
- Principal risk.
- Frequency of payments.
Which is better PMS or mutual funds?
Equity Mutual funds have to invest up to 65 per cent in equity irrespective of the market conditions. PMSs are better here as they can be flexible with their investments and can increase or decrease their allocation to equity based on market scenarios and investor requirements.