CAT III AIF in India: Top Performing Funds, Oldest Funds, and Key Insights for Investors (2025)

Alternative Investment Funds (AIFs) have gained significant traction in India over the past few years, particularly Category III (CAT III) AIFs, which are known for their ability to generate high returns through sophisticated investment strategies.

CAT III AIFs are typically hedge funds, private equity funds, or other funds that employ diverse or complex trading strategies, including leverage and derivatives. In this article, we will explore the top-performing CAT III AIFs in India, their performance across various time frames, the oldest funds in the market, the difference between open-ended and closed-ended funds, and the type of investors who should consider investing in AIFs.

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What are CAT III AIFs?

CAT III AIFs are regulated by the Securities and Exchange Board of India (SEBI) and are designed for investors seeking higher returns through aggressive investment strategies. These funds can invest in a wide range of asset classes, including equities, derivatives, debt, and structured products. They are often leveraged and may use short-selling, arbitrage, and other complex strategies to maximize returns.

Key Features of CAT III AIFs:

• High Risk, High Return: CAT III AIFs are suitable for investors with a high-risk appetite.
• Diverse Strategies: These funds employ a variety of strategies, including long-short equity, market-neutral, and event-driven approaches.
• Regulated by SEBI: CAT III AIFs must comply with SEBI regulations, ensuring transparency and investor protection.
• Limited Liquidity: These funds often have lock-in periods, making them less liquid compared to traditional mutual funds.

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Top 5 CAT III AIFs in India (2025 Performance)

Based on the latest performance data published by PMSBazaar as of 28 February 2025, here are the top 5 CAT III AIFs in India, along with their performance across various time frames:

1. FinAvenue Growth Fund

• AMC: A9 Finsight Pvt Ltd
• AUM: 322 Cr
• Type: Open Ended
• 1-Year Return: 48.46%
• 3-Year Return: NA
• Since Inception Return: 82.89%
• Inception Date: July 2023

Finavenue Growth Fund is a long-only, sector-agnostic investment vehicle focused on capitalizing on growth opportunities across various industries. With a strategic emphasis on delivering superior returns through meticulous research and expert insights, the fund seeks to identify promising companies poised for sustainable expansion.

Why It Stands Out: With an impressive 1-year return of 48.46%, FinAvenue Growth Fund is one of the top-performing CAT III AIFs in India. Its open-ended structure allows investors to enter and exit with relative ease, making it a popular choice for HNIs.

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2. Negen Undiscovered Value Fund

• AMC: Negen Capital Services Pvt Ltd
• AUM: 566.07 Cr
• Type: Open Ended
• 1-Year Return: 7.29%
• 3-Year Return: NA
• Since Inception Return: 40.92%
• Inception Date: September 2023

Key investment strategies of this fund include Special Situations Investments, Anchor Book Investments, Pre - IPOs, and value investing.

Why It Stands Out: This fund focuses on undervalued opportunities in the market. While its 1-year return is 7.29%, its since inception return of 40.92% showcases its strong long-term performance.

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3. First Water Capital Fund

• AMC: First Water Capital Advisors LLP
• AUM: Undisclosed
• Type: Closed Ended
• 2-Year Return: 37.40%
• 3-Year Return: 25.97%
• Since Inception Return: 33.44%
• Inception Date: August 2020

Why It Stands Out: First Water Capital Fund has consistently delivered strong returns, with a 1-year return of -4.57% and a 3-year CAGR of 25.97%. Its closed-ended structure ensures that the fund can focus on long-term growth without the pressure of redemptions.

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4. Aequitas Equity Scheme I

• AMC: Aequitas Investment Consultancy Pvt Ltd
• AUM: 1243.19 Cr
• Type: Open Ended
• 1-Year Return: -3.74%
• 3-Year Return: 32.80%
• Since Inception Return: 25.98%
• Inception Date: March 2019

Why It Stands Out: Despite a negative 1-year return of -3.74%, this fund has delivered a strong 3-year CAGR of 32.80% and a since inception return of 25.98%, making it a reliable choice for long-term investors.

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5. Shepherd’s Hill Private Investment Fund

• AMC: Shepherd’s Hill Financial Advisors LLP
• AUM: 125.46 Cr
• Type: Open Ended
• 1-Year Return: 4.60%
• 3-Year Return: 29.69%
• Since Inception Return: 20.63%
• Inception Date: April 2019

Why It Stands Out: This fund has delivered consistent returns, with a 1-year return of 4.60% and a 3-year CAGR of 29.69%. Its focus on private investments and high-growth opportunities has made it a favorite among HNIs.

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5 Oldest CAT III AIFs in India

For investors interested in funds with a long track record, here are the 5 oldest CAT III AIFs based on their inception dates:

1. Samvitti Capital Pvt Ltd - Alpha Fund

• Inception Date: November 2015
• Type: Open Ended
• 1-Year Return: -21.85%
• Since Inception Return: 10.78%

Why It Stands Out: As the oldest fund in the list, it has been operational since November 2015. Despite recent underperformance, it has delivered a 10.78% return since inception, showcasing its long-term resilience.

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2. Alchemy Capital Management - Leaders of Tomorrow

• Inception Date: January 2018
• Type: Open Ended
• 1-Year Return: 3.24%
• Since Inception Return: 14.48%

Why It Stands Out: This fund has been running since January 2018 and has delivered a consistent 14.48% return since inception, making it a reliable choice for long-term investors.

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3. Nippon Life India AIF Management Ltd - NIEO 2 - Financial Services

• Inception Date: January 2018
• Type: Closed Ended
• 1-Year Return: 0.30%
• Since Inception Return: 9.50%

Why It Stands Out: Launched in January 2018, this fund focuses on the financial services sector and has delivered a steady 9.50% return since inception.

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4. Tata Asset Management Ltd - Absolute Return Fund

• Inception Date: April 2019
• Type: Open Ended
• 1-Year Return: 8.23%
• Since Inception Return: 8.06%

Why It Stands Out: This fund, launched in April 2019, has delivered consistent returns with a focus on absolute return strategies.

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5. Shepherd’s Hill Private Investment Fund

• Inception Date: April 2019
• Type: Open Ended
• 1-Year Return: 4.60%
• Since Inception Return: 20.63%

Why It Stands Out: Also launched in April 2019, this fund has delivered exceptional returns, making it one of the top-performing funds in its category.

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Open-Ended vs. Closed-Ended Funds: Key Differences

Open-Ended Funds:

• Liquidity: Investors can buy or sell units at any time, providing high liquidity.
• NAV-Based Pricing: Units are bought and sold at the Net Asset Value (NAV) calculated daily.
• Flexibility: Suitable for investors who prefer flexibility in entering and exiting the fund.
• Example: FinAvenue Growth Fund, Neugen Undiscovered Value Fund.

Closed-Ended Funds:

• Lock-in Period: These funds have a fixed tenure, and investors cannot redeem their units before maturity.
• Capital Commitment: Ideal for investors who can commit capital for the long term without the need for liquidity.
• Focus on Long-Term Growth: Fund managers can focus on long-term strategies without worrying about redemptions.
• Example: First Water Capital Fund, Nippon Life India AIF Management Ltd - NIEQ 2.

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Who Should Invest in CAT III AIFs?

CAT III AIFs are not for everyone. They are best suited for the following types of investors:

1. High-Net-Worth Individuals (HNIs): Investors with a high-risk appetite and significant capital to allocate to alternative investments.
2. Institutional Investors: Pension funds, endowments, and other institutional investors looking for diversification and higher returns.
3. Sophisticated Investors: Those who understand complex investment strategies, including leverage, derivatives, and short-selling.
4. Long-Term Investors: Investors who can commit capital for the long term and are not concerned about short-term liquidity.

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Key Considerations Before Investing

• Risk Appetite: CAT III AIFs are high-risk investments and are suitable only for investors with a high-risk tolerance.
• Lock-in Period: Many CAT III AIFs have lock-in periods, limiting liquidity.
• Fees: These funds often charge higher management and performance fees compared to traditional funds.
• Due Diligence: Investors should thoroughly research the fund’s strategy, track record, and management team before investing.

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Conclusion

CAT III AIFs in India offer a unique opportunity for investors to achieve high returns through sophisticated investment strategies. The top-performing funds, such as FinAvenue Growth Fund, Negen Undiscovered Value Fund, and First Water Capital Fund, have demonstrated their ability to deliver strong returns across various time frames. Additionally, the oldest funds, like Samvitti Capital Pvt Ltd - Alpha Fund, provide insights into long-term performance and resilience.

By understanding the performance and strategies of these top CAT III AIFs, the difference between open-ended and closed-ended funds, and the type of investors who should consider AIFs, you can make informed decisions and potentially enhance your portfolio returns in 2025 and beyond.