What is Finavenue Growth Fund (Category III AIF) And How It Works

A Different Way to Think About Private-Market Money

Most investors meet private equity through bulky, decade-long funds that lock up capital and send cryptic quarterly letters. Finavenue AIF starts from the opposite premise: keep the upside of unlisted companies, but give investors liquidity windows, transparent fee structures, and a manager who stays on the tight side of risk. Finavenue Growth Fund, a Category III Alternative Investment Fund registered with SEBI, does exactly that.

What the Label “Category III AIF” Actually Means

SEBI lumps all private pools of capital into three buckets. Category III is the only one allowed to use leverage, derivatives, and long-short tactics inside the same corpus. In plain English, the manager can:

• Buy pre-IPO shares, late-stage start-ups, or even small public stocks
• Hedge single-stock risk with options
• Borrow short-term against the portfolio to juice returns
• Run a partially open-ended structure, redeeming every 18-24 months

The trade-off: no pass-through tax status. The fund pays the top marginal rate, then distributes what is left. Investors therefore care more about net IRR than headline gross numbers.

How the Finavenue Growth Fund Company Puts Money to Work

Finavenue Growth Fund company writes cheques between INR 30-75 cr into companies that are 2-3 years away from an IPO. Each position is sized at 5-12 % of the corpus, never more, so two blow-ups cannot sink the vintage. The deal pipeline comes from three sources:

• Secondary purchases from ESOP holders or early angels who want liquidity
• Pre-IPO placements where the founder needs a marquee name on the cap table
• Special situations such as delisting candidates or holding-company discounts

Once a name is inside the portfolio, the team revalues it monthly using a third-party valuer, marks the position to the last round, and publishes a NAV that is actually NAV—no side-pockets, no soft-closes.

The Fee Structure That Doesn’t Eat the Alpha

A 2 % management fee and 10 % carry above an 8 % hurdle keeps more of the upside in the investor’s pocket than the traditional “2 and 20.” High-water-marking is monthly, so paying carry twice on the same gain is impossible. Finavenue also rebates breakage: if a deal fails to close, legal and deal costs go back to the LP, not to the expense ratio.

Liquidity Without the Listed-Market Whiplash

Every 20 months the fund offers a redemption window, capped at 15 % of NAV. If units tendered exceed 15 %, everyone is scaled back pro-rata. The portfolio therefore keeps 15 % in cash or near-cash equivalents—usually tri-party repo or 91-day T-bills—so fire-sales are unnecessary. Since launch, the worst discount to carrying value has been 4 %, and that lasted two weeks.

Who Is Behind the Curtain?

The scheme is sponsored by ALTPORT, an asset management company Category III AIF that spun out of a domestic brokerage house in 2019. The investment committee pairs a former McKinsey partner who led the IPO readiness practice with a derivatives quant who once ran prop books at two foreign banks. That odd couple—strategy meets structuring—is what lets the fund run both long-only growth bets and hedged overlays in the same vehicle.

Risk Controls Most Retail Pools Ignore

• Single-stock exposure capped at 12 % of NAV at entry, 15 % after appreciation
• Gross leverage never above 1.3×, net never above 0.6×
• At least 60 % of the gross must be in Indian incorporated companies to avoid treaty risk
• Derivatives can only hedge existing positions, not create naked shorts
• An independent custodian and trustee sign off on every corporate action within T+1

Return History Since 2020

The first vintage, raised in May 2020, has returned 19.3 % XIRR net of all costs. The second vintage, raised in December 2021, is currently at 14.7 % net, despite two portfolio companies delaying IPOs. Downside months have been three out of forty-six, with the worst at –3.8 %. Those numbers are not eye-popping in bull markets, but they beat the Nifty 500 by 900 bps with half the volatility.

How to Enter, How to Exit

Minimum commitment is INR 1 cr, and units are held in demat form. KYC is video-based; the entire subscription can be done on a mobile browser. On exit, investors can:

• Sell on the stock exchange if they find a counter-party (illiquid, but possible)
• Tender during the 18-month window
• Transfer to a family trust or relative off-market at prevailing NAV

Stamp duty on off-market transfers is 0.015 %, negligible relative to the carry saved.

When Finavenue AIF Fits and When It Doesn’t

Fit: You already own a Nifty ETF, some tax-free bonds, and a global feeder fund; you want private-market kick without a ten-year handcuff.

Skip: You need predictable cash flows for a 2026 college fee or you cannot stomach mark-to-market swings every month.

The Quiet Compounding Path

Private wealth in India is moving from “more return” to “same return, less chaos.” Finavenue Growth Fund sits in that narrow lane: still equity, still early, but hedged, shorter-dated, and fee-light. Managed in partnership with ALTPORT, the fund combines institutional discipline with investor-friendly liquidity.

If the next decade rewards companies that generate cash instead of just stories, a portfolio already harvesting those cash flows—while protecting the downside with derivatives—should keep doing what it has done so far: beat inflation by a mile and sleep better at night. Finavenue AIF is not the only way to play the private market, but for capital that wants growth without the usual lock-up drama, it is one of the cleanest structures on the shelf today.