AIFNovember 8, 2022 2023-01-03 8:21
Buoyant Capital has recently launched the Buoyant Capital AIF. This is a product that is particularly suitable for people who
- (a) have a regulatory constraint with regard to investing in a PMS scheme and/or
- (b) do not want to maintain accounting records or administer income tax on their investments
An AIF works like a Mutual Fund in that it is a pooled investment vehicles that issues units to investors. The NAV per unit is calculated based on the transactions of the AIF, accrued incomes such as dividends and the market price movements of the securities held in the AIF from time to time adjusted for expenses and fees.
It is different (and usefully so) from a PMS as investors hold merely the units of the fund and NOT the securities in their own names. This enables a sizable part of the eligible and addressable investor population in India to entrust their investments to alternative asset managers. In particular, professionals in sectors such as banks, NBFCs, capital markets, insurance, legal services, audit/assurance and consulting firms can confidently invest in AIFs. These businesses typically restrict their key employees from investing in PMS schemes as securities are held in the name of the investor, leading to conflict with investing Code of Conduct guidelines prevalent in these organisations as well as statutory requirements and public disclosures of personal holdings reported to the public or regulators such as SEBI.
Where an AIF differs from a mutual fund is that it provides for (and pays) income tax on the income generated by the fund. This makes the redemption of units tax free in the hands of investors as the proceeds of redemption are already tax free. In effect this means that AIF investors need not maintain books of account for their investments in AIFs (unlike what they do for PMS), nor do they have to worry about tax compliance and payments in this regard. This is another convenient feature of AIFs that endear them to many professionals.