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<br>There are many investment opportunities available for people to invest. Common investments fall into two categories: equity-oriented investments are market-linked and contribute to the equity capital of companies, while debt-oriented investments are unrelated and invest in fixed-yield instruments.<br>
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There are many investment opportunities available for people to invest. Common investments fall into two categories: equity-oriented investments are market-linked and contribute to the equity capital of companies, while debt-oriented investments are unrelated and invest in fixed-yield instruments. • There are capital risks involved in equity-oriented investments, but along with the risks, there is the potential for a superior return compared to debt-oriented investments.
On the other hand, the risk of losing capital invested is technically non-existent in debt-oriented investments, but the prospect of earning a return above the predetermined rate of return is absent. • Although many traditional investment instruments are available in both equity-oriented and debt-oriented categories, most of them have pervasive investment patterns and individual investors have little say in the composition of the portfolio. • However, with large amounts to invest, High Net Worth Individuals (HNIs) want to have a say on investment management to generate superior returns when investing in niche segments, which are not otherwise subject to traditional investment products due to to stricter regulatory controls.
As described by Rao, there are 3 FIA categories: • Category I Alternative Investment Fund are those funds that invest in start-ups or social risk funds, infrastructure funds, SME funds, etc. The government or regulators consider this category of funds as socially viable or economically desirable. • Category II Funds are those that are not leveraged or borrowed, except to meet daily operating requirements. This category generally consists of private equity funds and debt funds. • Category III funds are generally made up of hedge funds that employ diverse or complex business strategies. When investing in listed or unlisted derivatives, AIF managers try to use leverage.
"Generally, with significant prior experience managing corporate funds and / or mutual funds, AIF fund managers tend to bring more experience than MF managers to provide better management and innovation. • Thus, IDAs provide HNIs with opportunities to generate superior returns through personalized investments. • However, with less control and regulatory interventions, AIFs carry more risks compared to MFs and other traditional investments.
“It should be noted that, by nature, AIFs carry more risk, have a deadlock period and require time for strategy to develop. As a result, they are suitable only for those who are willing to wait for the innovative theme to develop and take the risk for that moment. Investors should invest in FIA only if their risk profile aligns with this expectation. • Warning HNIs about the highest risk factor, Rao said: “In terms of allocation to AIFs, it is important to consider the overall allocation of the financial portfolio management to the underlying asset; however, it would be prudent not to go beyond 5 percent in a non-traditional IDA in a single name”.
About us • CAMS has been a leading service provider to Alternative Investment Fund (AIF) and Portfolio Management Service (PMS) enterprises in India for more than a decade. Deep domain expertise, customized solutions developed on a core proprietary platform, and vast repository of industry knowledge are some of the unique differentiators of the CAMS delivery model. This model ensures that our clients derive the twin benefits of outsourcing - services from a specialist service provider and cost benefits. • Website - https://www.camsonline.com/ • Alternative Investment Fund - https://www.camsonline.com/Business/AIF&PMS
