AIF assets grow 42% in FY22
The assets of alternative investment funds (AIFS) touched ~6.41 trillion at the end of the January-march quarter, growth of 5.2 per cent over the previous quarter, reveals the Securities and Exchange Board of India (Sebi) data.
Assets of the AIF industry have grown 42 per cent in the past year, as an increasing number of wealthy investors turned to such funds to derisk their portfolios and maximise returns. The industry has grown more than 7x in the past five years, from assets of ~80,000 crore.
AIFS have a minimum ticket size of ~1 crore and aim to offer investors access to sophisticated strategies across different asset classes.
Discerning investors, who have seen multiple market cycles, have exposure to different asset categories — both globally and domestically — and through different investment vehicles, need a more customised approach that allows them to invest according to their individual risk and return profile.
Given the rich valuations in the listed space, investors are looking at alternatives, such as structured credit, venture capital, private equity (PE) and real estate funds, and long-short strategies in Category III, all of which may have little correlation with long equities, said experts.
According to the Indian Association of Alternative Investment Funds, with sophisticated investors looking beyond traditional retail-oriented investments, AIFS are expected to potentially witness 3x growth over the next five years and surpass ~1.7 trillion assets under management.
AIFS offer risk-return combinations and flexibility with professional management that other vehicles like mutual funds (MFS) or portfolio management services (PMS) or direct investment cannot offer. The last few years has also seen star fund managers from the MF industry set out on their own to manage AIFS.
According to Tejesh Chitlangi, senior partner, IC Universal Legal, category III AIFS, despite not having a conducive tax regime and whilst facing a relatively higher degree of regulatory supervision from Sebi compared to other categories, have still achieved significant success and witnessed some path-breaking structures and funds.
“These are indicators of resilience and affirm that the industry is set for exponential growth in the coming years,” he said.
The assets of Category II funds form 80 per cent of the total AIF industry. Funds which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements are classified as Category II.