Global investors are paying closer attention to India’s International Financial Services Centre
(IFSC) at GIFT City. At the heart of this ecosystem lies the Alternative Investment Fund (AIF)
structure, which is quickly becoming the preferred route for fund managers seeking cross-border
efficiency and investors seeking regulated access to India’s growth story.
Understanding GIFT City AIFs
GIFT City AIF is an Alternative Investment Fund registered with the International Financial
Services Centres Authority (IFSCA). It operates within the special regulatory framework of GIFT
City, designed to facilitate global capital participation while maintaining strong governance
standards.
Unlike traditional onshore AIFs, the GIFT City AIF fund structure provides a globally competitive
platform with features such as tax neutrality on certain transactions, easier foreign investor
participation, and faster regulatory approvals.
For fund managers, this means efficiency in fund setup and management. For investors, it
means greater clarity on taxation and regulatory treatment when allocating capital into India.
Why GIFT City AIFs Are Gaining Popularity
Several structural advantages are driving adoption of GIFT City funds:
- Tax Efficiency – Certain capital gains and interest incomes enjoy tax neutrality, making fund structures globally competitive.
- Ease of Access for Global Capital – Investors from across jurisdictions can participate without the friction of traditional FDI/ODI rules.
- Regulatory Clarity – IFSCA provides a unified framework, reducing the need for multiple approvals across agencies.
- Cross-Border Flexibility – Funds can invest in India, overseas markets, or a mix, depending on strategy.
- Institutional Participation – Growing recognition by sovereign wealth funds, pensions, and global institutions is validating the model.
Types of GIFT City Funds
The IFSC fund structure allows flexibility similar to global fund hubs like Singapore or Luxembourg. Within GIFT City, fund managers can launch:
- Category I and II AIFs – Focused on private equity, venture capital, infrastructure, and private credit strategies.
- Category III AIFs – Designed for hedge funds, public markets, and long-short or derivative strategies.
- Mutual Funds and ETFs – Also permitted under the GIFT City framework, broadening the investor base.
This diversity allows both domestic and international fund managers to structure vehicles aligned with their investment philosophy.
Key Considerations for Fund Managers and Investors
While the appeal is strong, disciplined evaluation remains essential. Factors to weigh include:
- Fund governance standards and operational partners
- Compliance with IFSCA regulations
- Tax treatment for the investor’s home jurisdiction
- Clarity on investment mandate and liquidity profile
Investors must remember that while GIFT City enhances efficiency, underlying portfolio risks
market, credit, and liquidity remain unchanged and require rigorous due diligence.
Whitespace Alpha’s Perspective
At Whitespace Alpha, we see GIFT City AIFs as a structural enabler of India’s global capital
flows. The framework offers efficiency without diluting regulatory oversight, creating a bridge
between India’s domestic growth opportunities and global investor pools.
Our approach is to integrate GIFT City structures into disciplined strategies that match client
mandates while maintaining focus on risk-adjusted compounding. By combining onshore
expertise with the IFSC fund structure, we believe institutional investors can unlock more
resilient and scalable access to India.
As GIFT City continues to mature, its AIF platform is set to become a core pillar of India’s
financial globalization. For fund managers, it provides a credible jurisdiction to launch globally
competitive funds. For investors, it opens a transparent, tax-efficient, and institutionally
governed path into India’s growth markets.
At Whitespace Alpha, we actively track GIFT City developments to design fund strategies that
align with global capital needs and India’s evolving opportunity set.