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Data presented at the CafeAlt Conference 2024 by Vikaas Sachdeva, MD, Sundaram Alternates reveals that 4 out of 5 investors seek distributor support to invest in Cat III AIF. In Cat II AIFs, 50% individuals seek distributors' help to invest money.
Cat III AIF involves funds that employ diverse or complex trading strategies and can employ leverage including through investment in listed or unlisted derivatives. This includes long only funds and long short funds.
On the other hand, Cat II AIF involves funds that do not take leverage or borrowing. These funds invest in private or unlisted securities. Some examples of funds are private equity funds, distressed assets and credit funds.
Cafemutual spoke to AIF experts to know their views on this trend. Here’s what they had to say:
Yogesh Thakkar, Co-head – Business Development, Karma Capital said that Cat III AIFs are very complicated and have unique underlying holdings. Investors seek distributor advice to check whether there is any overlap with their existing portfolio. Also, many investors seek distributors' help to see if a particular scheme is adding any value to their investment portfolio.
Raghav Iyengar, CEO, 360 One Assets points out that many individuals prefer investing in Cat III AIFs compared to Cat II AIFs. Cat II AIFs are largely bought by institutions like banks and corporates.
Saurabh Mittal, Founder Director, Circle Wealth Advisors also echoed a similar sentiment. He attributed this to a smaller investor base of individuals in Cat II AIFs.
As larger AMCs have more schemes in Cat III, distributors who are associated with them sell Cat III schemes more, said Mumbai MFD Anand Shah of IPCON. Also, a lot of Cat II schemes do not involve distributors to promote schemes.