AIFs can give investors access to strategies and asset classes — private equity, venture capital, structured credit, distressed assets, or complex trading strategies — that simply aren't available through listed mutual funds or direct stock investing. Because they aren't bound by the diversification and liquidity rules that apply to mutual funds, AIF managers can build more concentrated, opportunity-specific portfolios and pursue strategies with a longer time horizon, which can suit investors looking to diversify beyond their traditional listed portfolio. Being privately placed and professionally managed, AIFs also typically involve a closer, more direct relationship between the investor and the fund manager, with detailed reporting on the specific investments made under the fund's strategy.

AIFs generally come with a significantly higher minimum commitment than mutual funds, and units are far less liquid — many AIFs are close-ended with a fixed tenure, meaning your money may be locked in for several years with no ready secondary market to exit early. The specific risks vary widely by category and strategy: Category I and II funds carry business, execution and valuation risk on unlisted assets, while Category III funds can add leverage and derivative-related risk on top. Because AIFs are offered through a private placement memorandum rather than a public prospectus, it's important to read that document in full — including fees, strategy and key risks — rather than relying only on a summary, before deciding whether an AIF fits your risk profile and horizon.