Alternative Investment Funds
Alternative Investment Funds — understood before they're offered
Category III long-short and other AIF strategies for sophisticated investors — ₹1 crore minimum per SEBI (AIF) Regulations, with lower tickets only for SEBI-accredited investors. We explain the structure first; specific funds are discussed privately with eligible investors.
01 — The Structure
Three SEBI-registered categories, each with a different strategy, structure, and tax treatment.
Understanding which category a fund falls under — and what that means for lock-in, leverage, and taxation — is the starting point before any specific fund is discussed.
Category I
Venture capital, social impact, infrastructure
SEBI-registered funds focused on early-stage and growth-stage companies, social ventures, or infrastructure projects. Domestically oriented and typically closed-end with a defined tenure. Cat I AIFs generally carry favourable pass-through taxation — income is characterised and taxed in the investor's hands, not at the fund level.
Category II
Private credit, private equity, real assets
The broadest and most common AIF category — encompassing private equity, private credit (direct lending), real estate, and real assets. Cat II funds cannot use leverage for investment purposes. Like Cat I, they carry pass-through taxation: income is characterised in the investor's hands, preserving the nature of the underlying return (capital gain, interest, dividend).
Category III
Long-short, hedge fund, complex derivatives
Employs diverse, often complex strategies — long-short equity, listed and unlisted derivatives, arbitrage. Unlike Cat I and II, Cat III AIFs are taxed at the fund level, not in the investor's hands. This is a meaningful structural difference from the other categories and from mutual funds. If you are considering a Cat III AIF, consult your CA before committing.
02 — The Honest Picture
What most AIF pitches leave out until after you've committed.
AIFs are sophisticated instruments with real structural complexity. These are the things we explain before any fund is discussed — not after you've signed.
Illiquidity and lock-ins
Most AIFs are closed-end funds with tenures of 2–5+ years. Your capital is locked for the fund's life — there is typically no early redemption option and no secondary market to sell your units. This is not a product for capital you might need before the fund matures.
Capital calls and drawdown schedules
You commit to a total investment amount, but the fund draws that capital in tranches over time — not in a single upfront lump sum. You need to be ready to transfer funds on each call date. Missing a capital call can have contractual consequences; confirm the drawdown schedule from the PPM before you sign.
Fee stack — management, carry, setup
AIFs typically charge a management fee (annual, on committed or drawn capital), a performance fee or carried interest (a share of profits above a hurdle rate), and sometimes a one-time setup or administration fee. The total fee stack can be material; it is disclosed in the PPM and must be read in full before committing.
J-curves: early losses before returns
In the early years of a closed-end fund, fees are charged before portfolio investments have matured or been realised. This often produces a period of negative net returns — the J-curve. Investors who measure performance in the first 2–3 years of a fund's life typically see an unflattering picture that normalises only as realisations occur.
Taxation: pass-through vs fund-level
Cat I and II AIFs are generally pass-through for tax: income retains its character and is taxed in your hands. Cat III AIFs are taxed at the fund level — a different regime entirely from the other categories and from mutual funds. The difference affects your net post-tax return materially. Consult your CA before committing to any AIF, particularly Cat III.
Exit complexity — thin secondary market
AIF units are not listed on exchanges. There is no reliable secondary market for resale — and where one exists, it is illiquid and typically at a significant discount. Liquidity comes only at fund maturity or when the manager winds down. Plan for your capital to be unavailable for the full fund tenure.
03 — Eligibility and Fit
Who can invest, and where AIFs belong in a portfolio.
Who qualifies
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₹1 crore minimum per SEBI (AIF) Regulations
This is a SEBI-mandated floor under the SEBI (Alternative Investment Funds) Regulations, 2012 — not a threshold set by LFS or by the individual fund. The minimum applies per investor, per fund.
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Accredited investors — lower tickets, where a fund permits
SEBI's accredited-investor framework exempts accredited investors from the ₹1 crore floor. Where a fund chooses to accept them, tickets typically start around ₹25 lakh. Accreditation is issued by a SEBI-recognised accreditation agency and has to be in place before you commit.
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Sophisticated investor definition
AIF investors are assumed to be sophisticated — capable of understanding the risks and capable of bearing the financial consequences of the investment. The ₹1 crore minimum is designed to reflect this; it is not a barrier, it is a signal.
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NRI eligibility is fund-specific — always confirm
NRI investors may be eligible, but eligibility is determined by the individual fund's structure and is governed by FEMA regulations. Not every AIF accepts NRI capital. Confirm with us once a specific fund has been shortlisted — do not assume before then.
Where it fits in a portfolio
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On top of a core portfolio, not instead of one
AIFs are allocation money on top of a functioning mutual fund or PMS portfolio — not a replacement for it. The core portfolio covers liquidity and goal-linked needs; AIFs are for capital surplus to those goals that can be committed for the long tenure.
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Illiquid capital only
The capital allocated to an AIF should be money you genuinely do not need before the fund's tenure ends. Emergency reserves, near-term goal capital, and liquidity buffers should not be committed to an AIF — the structure does not allow early exit.
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After the equity/debt/goal picture is anchored
AIFs are appropriate only after your goal-mapped allocation — equity, debt, and cash — is in place and working. We do not shortlist an AIF for an investor whose core portfolio is not yet structured; the sequencing matters for risk management and for the suitability conversation.
AIF units are offered by private placement. We don't solicit publicly.
SEBI regulations restrict the public solicitation of AIF units. No fund names, no track records, no PPM excerpts appear on this page — and this is not a gap we plan to fill. Specific fund details, historical performance data, and Private Placement Memorandums are shared on request with eligible investors after a suitability and eligibility conversation. Past performance of any fund is not indicative of future results. This is a compliance discipline, not a teaser. It is also the only honest way to match an AIF to an investor — context and suitability matter more than a return number divorced from both.
04 — What Happens Next
From eligibility check to committed and integrated.
Eligibility and suitability check
Confirm the ₹1 crore minimum per SEBI (AIF) Regulations — or your accredited-investor status; assess whether an AIF allocation fits your picture alongside existing mutual funds or PMS. If the timing or allocation isn't right, we say so — before any fund is named.
Education call
Category selection (Cat I / II / III), lock-in tolerance, capital-call schedule, tax treatment. We work through the structural mechanics before any fund enters the conversation. No fund is named until eligibility is confirmed and you are comfortable with the structure.
Shortlist of suitable funds
Based on category, strategy, lock-in window, fee structure, and track record — shared privately in the prescribed format. We present the shortlist with the reasoning, including what we decided against and why.
PPM walkthrough
LFS walks you through the Private Placement Memorandum before any commitment: investor rights, fund risks, carried interest structure, key-person provisions, and wind-down mechanics. You understand what you are signing before you sign it.
Commitment and drawdown planning
Onboarding paperwork handled. Drawdown schedule mapped against your liquidity picture so capital call dates don't create cash-flow surprises. The AIF is then integrated into your scheduled LFS reviews — alongside your full portfolio.
05 — Transparency
How we're paid — plainly stated.
LFS acts as distributor, not fund manager. We do not manage AIF portfolios — we evaluate funds independently, facilitate access with eligible investors, and receive a distribution fee from the AIF. You do not pay LFS directly.
Fund manager fees
The AIF charges a management fee and, typically, performance carry above a hurdle rate — both per the Private Placement Memorandum. Fee structures vary significantly by fund category and strategy and are disclosed in full before any commitment. There is no standard rate across AIFs.
LFS distribution fee
Ladder Financial Services receives a distribution fee from the AIF — disclosed in full before commitment. You do not pay LFS directly; the fee is paid from the AIF's fee structure, not as an additional charge on your investment. Full details are in our Commission Disclosure.
06 — Common Questions
Things people usually ask about AIFs.
What is the minimum investment?
How long is my capital locked up?
How is LFS paid?
How is an AIF taxed differently from a mutual fund?
Can NRIs invest in AIFs?
07 — Alternative Investment Funds
A conversation about whether AIFs belong in your portfolio.
No fund names until eligibility is confirmed. No commitment until you've read the PPM with us.
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