The Securities and Exchange Board of India (SEBI) has introduced the Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) framework, allowing eligible Alternative Investment Fund (AIF) schemes to launch within 10 working days of filing their Private Placement Memorandum (PPM), unless the regulator raises objections.
The new framework replaces a process that often took around a month for scheme launches. While GARUDA is aimed at improving ease of doing business for the alternative investment industry, experts believe its benefits could also extend to investors through faster fundraising, quicker capital deployment and a wider range of AIF offerings over time.
What is an AIFs?
- AIFs, as an asset class, are instrumental in channelizing the capital of sophisticated investors to companies in need. Given the rapid expansion of the AIF industry in recent years, efficient capital deployment plays a pivotal role in sustaining this momentum and unlocking value for the broader economy.
- One of the biggest challenges under the current regime was the delay between filing a Placement Memorandum (PPM) and launching a scheme. Fund managers often had to wait close to a month, during which time-sensitive opportunities in private credit or pre-IPO investments could be lost.
- By reducing the launch timeline to 10 working days, GARUDA enables fund managers to act on investment opportunities more quickly and close investor commitments before they lapse.
- Shorter timeline also lowers execution pressure and compliance costs, particularly for smaller and emerging fund managers.
- In this context, SEBI has recently reviewed the procedure for processing Private Placement Memorandums (PPMs) of AIFs for launch of schemes/funds.
AIFs launch schemes/funds under three different buckets/tags
- Large Value Fund for Accredited Investors (‘LVF’) - Scheme of AIF in which each investor is an Accredited Investor and invests minimum INR 25 Crore.
- Accredited Investor Only Scheme/Fund (‘AI only scheme’) - Scheme of AIF in which each investor is an Accredited Investor, with no minimum investment amount prescribed.
- Non- Accredited Investor Scheme which excludes LVF, AI only scheme and Angel Fund (for ease of reference mentioned as ‘Regular schemes’) – Scheme of AIF which on-boards investors primarily based on minimum investment amount of INR 1 crore. This includes Special Situation Funds (SSFs) as well.
What is Green-Channel AIF Rollout Upon Document Acknowledgement (GARUDA)?
The Securities and Exchange Board of India (SEBI) has approved the Green-Channel AIF Rollout Upon Document Acknowledgement (GARUDA) mechanism to accelerate the launch of Alternative Investment Fund (AIF) schemes.
- The decision was taken through amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 at the regulator`s board meeting held on 19 June 2026.
Modalities for Regular Schemes
- SEBI has laid down specific rules for the launch and filing of Private Placement Memorandums (PPM) for "Regular schemes".
- AIFs are permitted to launch their new Regular schemes after 10 working days of filing their application with SEBI, unless advised otherwise by the regulator.
- For their very first scheme, AIFs can proceed with the launch from the date SEBI grants registration, or after 10 working days of filing the application, whichever is later.
- The PPM for Regular schemes must be filed through a SEBI-registered Merchant Banker.
- The appointed Merchant Banker must independently exercise due diligence regarding the veracity and adequacy of all disclosures in the PPM.
- To avoid conflicts of interest, the Merchant Banker appointed for filing the PPM cannot be an associate of the AIF, its sponsor, manager, or trustee.
- Both the Merchant Banker and the Manager of the AIF bear the responsibility of ensuring the accuracy and completeness of all disclosures made in the PPM.
Exemptions for Specialized Funds
To facilitate investment by high-net-worth participants, SEBI has provided regulatory relaxations for Accredited Investor Only Funds (AI only funds), Large Value Funds for Accredited Investors (LVFs), and Angel Funds.
Key Features & Relaxations:
- Large Value Funds (LVFs) are a category of AI-only funds where each investor contributes a minimum investment of INR 25 crore.
- AI-only funds and LVFs are completely exempt from the requirement of filing their PPM through a Merchant Banker.
- Furthermore, AI-only funds and LVFs are exempt from incorporating SEBI's comments into their PPM.
- Due to these exemptions, AI-only funds and LVFs can launch their schemes immediately upon filing their PPM with SEBI.
- Angel Funds enjoy similar relaxations and are exempt from filing their PPM through a Merchant Banker and incorporating SEBI's comments.
- Consequently, Angel Funds can begin circulating their PPM to investors to solicit funds immediately from the date they are granted SEBI registration. Instead of relying on a Merchant Banker, the PPM for these specialized funds must be filed alongside a duly signed and stamped undertaking.
- This specific undertaking must be executed by both the Chief Executive Officer (or equivalent) and the Compliance Officer of the AIF's Manager.
Mandatory Naming Conventions
- To ensure clarity and transparency for investors, SEBI has mandated specific naming conventions for schemes catering to accredited investors.
- Any new scheme launched as an AI-only fund must append the words 'AI only fund' or 'AIOF' at the end of its name (e.g., 'Xyz AI only fund').
- Any new scheme launched as an LVF must add the word 'LVF' to the end of its scheme name (e.g., 'Abc LVF').
Growth of the AIF industry and increased inflow:
- The industry has been growing rapidly, with the number of AIFs as of March 31, 2026 standing at 1849, a significant progress in comparison to 732 AIFs by end of March 31, 2021, constituting a 135% growth in the last 5 years.
- The cumulative commitments raised by AIFs amounts to INR 15.74 lakh crores and net investments made amounts to INR 6.45 lakh crores as on December 31, 2025, both growing at roughly 30% CAGR over the last 5 years.
Alternate Investment Funds (AIFs) Explained in Detail.
Alternate Investment Funds (AIFs) are SEBI regulated investment vehicles that pool capital from investors to invest in opportunities beyond conventional avenues like listed equities, bonds, or deposits. Designed primarily for high net worth and institutional investors, AIFs follow structured strategies across asset classes such as private equity, venture capital, real estate, and hedge funds.
- These funds are managed according to a defined investment policy with the goal of generating benefits for the investors.
Types of Alternate Investment Funds in India
Category I
- These funds aim to support economic and social progress by investing in areas like startups, small businesses, infrastructure development, and employment generating projects. They focus on sectors that contribute positively to growth and development, including social enterprises and new business ventures.
- Types of Category I AIFs:
- Venture Capital Funds (VCFs): These funds invest in newly established companies that demonstrate strong potential for rapid growth.
- SME Funds: These funds focus on providing financial resources to small and medium sized businesses to help them scale up their operations.
- Social Venture Funds:These funds target enterprises that aim to achieve social or environmental benefits, such as projects promoting renewable energy and sustainability.
- Infrastructure Funds: These funds finance the construction and development of essential infrastructure, including roads, railways, airports, and urban modernization initiatives.
Category II
- This category includes funds that invest in companies with an established presence that need additional capital to expand their operations. Such funds typically provide financing through private equity or debt and invest in companies that are not publicly traded.
- Types of Category II AIFs:
- Private Equity Funds: These funds provide capital to private companies to support their growth before they go public.
- Debt Funds: These funds invest in debt instruments issued by unlisted companies, which may carry higher risk due to lower credit ratings.
- Fund of Funds: These funds allocate capital across a variety of other Alternative Investment Funds to diversify investment risk.
Category III
- Funds in this category follow aggressive investment strategies targeting short term profits. They use methods such as trading, borrowing to amplify returns (leverage), and investing in complex financial instruments like derivatives.
- Types of Category III AIFs:
- Hedge Funds: These funds employ strategies such as short selling, arbitrage, and margin trading to pursue higher returns, often involving greater risk.
- Private Investment in Public Equity (PIPE) Funds: These funds invest in publicly traded companies by purchasing shares at a discounted price, typically when the company requires additional capital.
How AIFs Work?
- Alternative Investment Funds (AIFs) pool money from multiple investors to invest in asset classes that are generally not accessible through traditional mutual funds. Investors receive units or shares proportional to their investment in the fund.
- These funds usually require a significant minimum investment.
- A professional fund manager actively manages the portfolio, aiming to deliver returns based on the fund’s unique investment approach.
- AIFs typically invest in alternative asset class such as private equity, venture capital, hedge funds, real estate, distressed securities, and structured debt instruments.
Benefits of Investing in AIFs
- Access to Non Traditional Assets: AIFs allow investors to explore asset classes that are typically unavailable in traditional mutual funds, such as private equity, infrastructure projects, real estate, hedge funds, and distressed assets.
- Potential for Higher Returns: With tailored investment strategies, AIFs aim to deliver returns based on their strategies; however, returns are not assured and depend on market conditions. However, the potential for higher gains comes with increased risk.
- Portfolio Diversification: By spreading investments across varied asset classes, AIFs help reduce concentration risk and enhance portfolio resilience.
- Expert Fund Management: These funds are managed by experienced professionals with deep expertise in evaluating complex investment opportunities and executing strategic decisions.
- Lower Impact from Stock Market Volatility: Since AIFs focus on alternative assets rather than solely public equities, they are less influenced by daily market fluctuations.
Who Can Invest in AIFs?
- Alternative Investment Funds have defined eligibility conditions. Indian residents, Non Resident Indians, and foreign nationals can invest.
- Joint applications are allowed with a spouse, parents, or children.
- The minimum investment amount is Rs. 1 crore for most investors and Rs.25 lakh for fund managers, directors, or employees of the AIF.
- Generally, AIFs have a minimum lock in period of three years.
- Each AIF scheme can have up to 1,000 investors, while angel funds are restricted to a maximum of 49 investors.
Infographics Based on AIFs
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