Business Standard

In a first, AIF commitment­s top ~10 trillion

Experts believe the recent restrictio­n imposed by the RBI on investment­s from banks and NBFCS may slow down the pace of inflows in AIFS

- KHUSHBOO TIWARI Mumbai, 21 February

The investment commitment­s received by Alternativ­e Investment Funds (AIFS) have crossed ~10 trillion for the first time, amid a rising demand from rich investors eyeing to generate higher returns than convention­al investment vehicles.

As of December 2023, the investment commitment­s stood at ~10.84 trillion, up

13.6 per cent quarter on quarter (Q-O-Q) and over 40 per cent on a year on year (YO-Y) basis.

According to the data provided by the Securities and Exchange Board of India (Sebi), AIFS have raised around ~4.3 trillion, of which ~3.1 trillion has been in Category II, which comprises funds that dabble in debt and equity. AIFS are pooled investment products for high-net-worth individual­s with a minimum ticket size of ~1 crore.

Following the change in taxation of debt mutual funds and market-linked debentures in the Budget 2024, AIFS that invest in private credit have gained significan­t traction. The AIF industry has also undergone a slew of regulatory changes in the last year, with dematerial­isation for funds above the threshold, a revamp in the fee structure, benchmarki­ng, and valuation norms, among others.

However, experts believe that the recent restrictio­n imposed by the Reserve Bank of India (RBI) on investment­s from banks and nonbanking financial companies (NBFCS) may slow down the pace of inflows in AIFS.

The RBI had directed banks and NBFCS to either liquidate or make provisions for their investment­s in AIFS with debtor links — for funds with such companies in their portfolio to which they had already lent. The decision was taken to prevent the evergreeni­ng of loans.

Markets regulator Sebi also proposed a slew of changes for the AIF industry, including allowing pledges in the infrastruc­ture assets and ‘exclusion’ for certain investors by managers if it leads to a circumvent­ion of regulation.

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