Social units

Most AIF investors put money in to get money back, with a return. A social impact fund is for a different kind of investor. Their "return" is the social outcome itself — better sanitation, more girls finishing school — not a rupee coming back.

The workbook's definition, in section 17.8, is this: "Social impact funds can issue 'social units', which means units issued to investors who have agreed to receive only social returns or benefits and no financial returns against their contribution."

In effect, a social unit is a formal way of donating through a regulated fund. It is not a return-seeking investment.

Social units sit inside the broader Social Impact Fund category, which the workbook places under Category I AIFs and requires to invest only in securities of not-for-profit organisations registered or listed on a social stock exchange.

The regulatory thresholds are set lower than for an ordinary AIF scheme, because the investor base and purpose are different:

Social units are the mechanism that lets the fund carry investors who have no expectation of a financial return side by side with — or instead of — the ordinary return-seeking unit holders the rest of the chapter describes. Holding a social unit does not exempt the fund itself from AIF regulation; the fund still registers with SEBI, still appoints a Trustee/Manager/Custodian, and still operates within the same 17.8 raising-corpus framework as any other AIF, including the rule that no scheme may adopt a "priority distribution model" where one class of investors absorbs a disproportionate loss.

Illustrative figures, following the workbook's Rs 5 crore / Rs 2 lakh social impact fund thresholds.

Saksham Social Impact Fund is registered as a Category I AIF to invest in not-for-profit organisations running girl-child education programmes, listed on a social stock exchange. Its scheme corpus at launch is Rs 6 crore, clearing the Rs 5 crore minimum the workbook sets for a social impact fund scheme — below the Rs 20 crore minimum an ordinary AIF scheme would need.

Mrs Kavita Bhat contributes Rs 2 lakh — the workbook's stated minimum for an individual investing in a social impact fund — and is issued social units. Her subscription agreement records explicitly that she has agreed to receive only the social outcomes the fund reports (schools built, girls enrolled) and no financial return on her Rs 2 lakh.

Alongside her, an institutional investor commits Rs 3 crore through ordinary units, seeking a modest return alongside the social mandate. Both classes sit in the same scheme, but only Mrs Bhat's holding is structured as social units — the label describes what the investor has agreed to receive, not a separate legal fund.

Chapter 17 (Regulatory Framework), section 17.8 (Raising Corpus Capital), defines social units in the middle of the general corpus-raising conditions for all AIFs, alongside the Rs 20 crore ordinary scheme corpus and the Rs 5 crore social impact fund corpus. Expect a question asking what an investor in social units receives (no financial return, only social returns/benefits), and a threshold question on the reduced corpus requirement for a social impact fund scheme.

• Social units carry no financial return by the investor's own agreement — this is not a fund that underperformed; it is a fund the investor entered on donation-like terms from the start.
• Rs 5 crore is the social impact fund scheme corpus; Rs 20 crore is the ordinary AIF scheme corpus. Swapping the two is the standard trap.
• Rs 2 lakh is the individual investor minimum specific to a social impact fund — well below the Rs 1 crore minimum for an ordinary Category III open-ended AIF investor, reflecting the retail-accessible, donation-like nature of the vehicle.
• A social impact fund still invests only in social stock exchange–listed not-for-profits — social units do not let the fund invest in ordinary commercial securities.
• Do not confuse social units (a class of AIF units with no financial return) with Zero Coupon Zero Principal (ZCZP) instruments, a separate social-stock-exchange instrument taught elsewhere in the curriculum with its own structure.