How much does a fee-only advisor charge?
Fee structures for SEBI-registered RIAs in India typically fall into two common models:
- Flat retainer: ₹15,000 – ₹25,000 for the first six-month engagement, suitable for family financial planning, initial investment setup, ESOP exercise decisions, or NRI planning sessions.
- AUM-based annual fee: After the first 6 or 12 months, depending on the capital advised, 0.25% – 1% of the managed capital per year, suitable for ongoing portfolio investment management, quarterly check-in sessions, rebalancing, and broader family financial advisory.
Note that the advisor will charge either a flat fee or an AUM-based annual fee, but not both.
What is an Alternative Investment Fund (AIF)?
An AIF is a privately pooled investment vehicle registered with SEBI that collects money from sophisticated investors and deploys it under a defined strategy — in assets like private equity, private credit, real estate, or pre-IPO securities. Unlike mutual funds, AIFs are available only to investors who can commit at least ₹1 crore, and they come with lock-in periods of typically 3–7 years. They're designed for investors who want returns and diversification beyond what listed markets can offer.
What are the three AIF categories, and which is right for me?
SEBI classifies AIFs into three categories.
Category I — Covers social impact, infrastructure debt, SME funds, and venture capital. Often government-incentivised but limited in depth and return potential for most HNI investors.
Category II — The broadest and most relevant for salaried HNIs. Includes private equity, private credit, real estate funds, and pre-IPO strategies. Pass-through tax treatment. Deepest track records. This page focuses on Cat-2.
Category III — Hedge funds, long-short equity, algorithmic strategies. Higher complexity and volatility. Suited for investors already comfortable with Cat-2 who want to go further.
For most investors with ₹2–10Cr in investable capital evaluating alternatives for the first time, Cat-2 is the starting point.
What types of funds fall under Category 2 AIFs?
The main types within Cat-2 are:
- Private Equity (PE) funds — Invest in unlisted companies, target exits via IPO or strategic sale. Typical fund tenure 5–7 years, target IRR 18–25%.
- Private Credit / Debt funds — Lend to mid-market companies at rates higher than banks. Shorter tenures (2–4 years), more predictable returns, typical target IRR 12–18%.
- Real Estate AIFs — Structured credit or equity in real estate projects. Exposure to residential or commercial projects without buying property directly.
- Pre-IPO funds — Invest in companies 12–24 months before their listing. Higher risk, higher potential reward — and less liquidity than post-listing investments.
Each has a distinct risk profile, liquidity horizon, and return expectation. Choosing between them is where a good advisor adds the most value.
What is the minimum investment in an AIF?
SEBI mandates a minimum commitment of ₹1 crore per investor per fund. This is not a "start small and add more" investment — it's a full commitment that cannot be withdrawn for the fund's entire tenure. Most advisors recommend that your AIF allocation not exceed 20–25% of your total investable corpus. That means you realistically need at least ₹4–5Cr in investable assets before a ₹1Cr AIF commitment is considered prudent portfolio construction.
How long is the lock-in? Can I exit early?
Cat-2 AIFs typically have a fixed tenure of 4–7 years for PE funds, or 2–4 years for private credit funds. During this period, your capital is fully locked in — you cannot exit on demand, regardless of personal circumstances. Some funds allow secondary sales (selling your units to another investor on a secondary platform), but this market is thin in India and usually results in a meaningful discount to NAV. A small number of funds offer periodic liquidity windows (e.g., every 12–18 months), but these are the exception. Before committing ₹1 crore, make absolutely certain you won't need this capital for the fund's full life.
How are Category 2 AIFs taxed in India?
Cat-2 AIFs have pass-through tax treatment under the Income Tax Act. Gains are not taxed at the fund level — they pass through to investors and are taxed in your hands at your applicable rate. Long-term capital gains from equity-oriented strategies are taxed at 12.5% above ₹1.25L. Private credit funds typically generate returns taxed as interest income at your slab rate, or as capital gains depending on the fund's structure. Tax treatment varies meaningfully between funds — your advisor will model post-tax returns before recommending any specific AIF, since gross IRRs can look similar while net-of-tax outcomes differ significantly.
Is an AIF right for me if I have ₹2Cr to invest?
Possibly, but with important conditions. Investing ₹1Cr in a single AIF when your total corpus is ₹2Cr means 50% of your investable wealth is in one illiquid, multi-year commitment — most advisors consider this dangerously concentrated. AIF allocation makes more sense when it represents 15–25% of your total investable corpus. A Foliyo-matched advisor will look at your full picture — income stability, liquidity needs, existing portfolio, dependents, emergency fund — and give you an honest answer, including telling you to wait if the situation doesn't warrant it.
How is an AIF different from PMS?
PMS invests your money in listed stocks or bonds in a demat account in your name. It is market-linked, relatively liquid (most strategies allow exit within 30 days), and subject to daily market movements. AIFs invest in private, unlisted assets — PE, private credit, real estate — that are not traded on exchanges. They offer lower correlation to public equity swings and access to a genuinely different opportunity set, but require a much longer time horizon and accept far less liquidity. PMS starts at ₹50L; AIFs start at ₹1Cr. For most investors, PMS comes first — AIFs are added to the portfolio once the corpus is large enough to absorb the illiquidity without discomfort.
How does a Foliyo-matched advisor help with AIFs? Do they sell AIF products?
No. A Foliyo-matched advisor is a SEBI-registered, fee-only RIA. They do not sell AIF products and earn zero commission from any fund manager. Their role is to evaluate whether AIFs fit into your portfolio, which category and fund type is appropriate for your goals, how to read a PPM, and whether the fee structure — including any distribution commissions baked in — is fair. They charge you a transparent fixed advisory fee — nothing more. You then invest directly with the AIF manager of your choice.
What exactly is a SEBI Registered Investment Adviser (RIA)?
A SEBI RIA is a financial advisor registered with SEBI under the Investment Advisers Regulations, 2013. Unlike mutual fund distributors or wealth managers at private banks, RIAs are legally bound by a fiduciary standard — meaning they must always act in your best interest, disclose all conflicts of interest, and cannot earn commissions from any financial product. Their only source of income is the fee you pay them directly.
How is a fee-only RIA different from a private bank wealth manager?
The key difference is who pays the advisor. A private bank wealth manager earns distribution commissions from AIF managers — typically 1–3% upfront plus an annual trail — funded directly from your corpus at the time of commitment. They are financially incentivised to recommend funds that pay the most commission, not those best suited to your goals. A fee-only RIA earns only the fee you pay them. This structural difference eliminates the conflict of interest entirely and makes genuine fiduciary advice possible.
How does Foliyo make money if the matching is free?
Foliyo charges a flat referral fee directly to the advisor if and when you engage them — not from the advice fee you pay, and not from any product commission. This fee is disclosed to advisors upfront and does not change their fee structure for you. We do not earn from products, do not earn from your investments, and will never share or sell your data to third parties.
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