Alternative Investment Funds (AIFs) include private equity, venture capital, and hedge funds, primarily targeting high-net-worth individuals due to their complexity and risk. The recent SEBI circular mandates stricter due diligence for AIFs, focusing on preventing regulatory evasion, particularly concerning stressed loans. AIFs must now ensure thorough assessments of investors contributing significantly to any scheme, especially regarding compliance with the Sarfaesi Act. The regulations also affect foreign investments, requiring diligence based on profitability and government approval for entities from bordering countries. Experts note potential compliance challenges that could deter large investors, emphasizing the need for AIFs to adhere to the new standards.