India’s AIF industry doubles to $72 bn in 5 years: report
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India’s alternative investment fund (AIF) industry has doubled to $72 billion as of September 2021 from $36 billion in 2016 end – an increase of more than 100% in assets under management (AUM) for registered funds alone – according to a report.  

The report was published by Preqin, the global leader in alternative assets data, tools and insights, in partnership with the Indian Venture and Alternate Capital Association (IVCA) for Indian AIFs. 

India’s AIF industry is experiencing rapid growth and attracting investor interest, it said.  

The report found that Category I funds outperformed the MSCI India Total Return Index by 19%, backed by strong venture capital returns, with Category I funds of vintage 2016 being the best performing at 24.6% net internal rate of return (IRR).  

Additionally, India-focused venture capital funds offer the highest median net IRR compared to the other asset classes at 18% but have the highest standard deviation of net IRR at 34%.  

The benchmarks in the report comprise of 296 schemes registered with markets regulator Securities and Exchange Board of India (Sebi) across AIF Category I, II, and III, for performance data as of 31 March 2021.  

Angel funds and schemes without transactions are excluded. Category III and open-ended PIPE funds are eligible for benchmarking if they were incepted prior to March 2021.  

“These benchmarks provide a top-level overview on a range of indicators such as net internal rate of return (IRR), net multiple, called capital, distributions to paid-in-capital (DPI), and residual value to paid-in-capital (RVPI) on the dominant strategies that are employed by domestic managers,” the report stated.  

Category II AIFs comprising real estate funds, private equity (PE) funds, and funds for distressed assets cut the risk profile by providing a diversified investment portfolio.  

Geetanjali Bhalotia, SVP, APAC Head of Research at Preqin says, “With this, we are now able to provide transparency to various investors and managers, who are keen to tap on opportunities arising from India’s fast-growing alternative assets industry. The launch of this benchmark will help investors compare and measure fund performance of AIFs in India, and it further solidifies Preqin's commitment to the Asia-Pacific region.” 

As per Sebi data relating to activities of AIFs till 31 December 2021, total assets of AIFs have gone up to Rs 6.09 trillion in Q3 FY22 from Rs 5.35 trillion in Q2 FY22.  

Further, given the uncertainty and volatility in the domestic equity markets, family offices and high networth individual (HNI) investors are expanding their investments into avenues that provide better returns on their fixed income portfolios delivering low yields. 

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