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Market Intelligence › Basic Terminologies
The structure of Category I, II and III and their minimum ticket size
Published by The Retail Trader · JUL 22, 2026 · AIF, PE & Alternates
An Alternative Investment Fund is a pooled vehicle that operates outside the mutual fund framework. It has three categories, and they invest in different ways.
Category I goes into sectors that policy encourages — such as venture capital, infrastructure and social ventures.
Category II is a broad category that includes private equity and debt funds, which do not use leverage for general operations.
Category III is the one that can use complex strategies and leverage — long short and hedge fund style strategies fall here.
These points apply to all three:
• The minimum investment is very large, so this is not a retail product.
• Lock-in and limited liquidity are a normal part of it, not an exception.
• The fee structure has performance fees along with management fees.
• Reporting is not as frequent or standardised as in a mutual fund.
An AIF pitch is often built on exclusivity, but exclusivity is not return. The most important question here is for how many years the money is going away — because during that period it will simply not be available to you.
This article is for education only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.