The AIFs give investors access to a wide range of alternative assets, including infrastructure, real estate, and private equity.
It is a private-pooled investment that gives diversity beyond traditional investing options, including stocks, bonds, currencies, and gold.
The AIF market is rising at a rapid pace due to its increasing acceptance by both domestic and foreign investors. The vigorous government initiatives, and the Securities and Exchange Board of India’s (SEBI) reforms have also helped the AIF market grow.
According to reports, AUM, or total assets under management, also called commitments raised in AIFs jargon, has nearly tripled over the last five years, rising from $34,408 million in FY19 to $101,680 million in FY23.
The three main causes of the rise in
AIFs are the requirement for steady, long-term returns, market volatility, and India’s expanding high-net-worth demographic. All these factors depend on the type of category an investor chooses.
There are three types of categories in AIFs that help the investor choose the right investment. Each category suits up to a certain risk-return profile. Investors can look up any category by identifying high-growth assets, forecasting long-term trends, and constructing solid portfolios that can withstand market fluctuations.
Equity markets have always been susceptible to market volatility, driving investors to seek assets that protect against short-term fluctuations.
AIFs bridge this gap by facilitating diversification across a range of asset classes, such as structured debt funds, real estate investment trusts, infrastructure investment trusts, private equity, and venture capital.
Reports say the alternatives market is now worth $20 trillion globally, having doubled in size since 2005.
SEBI-registered AIFs are predicted to increase by more than five times to $750 billion over the next ten years. This change indicates that Indian investors are becoming more interested in high-yield and diversified opportunities.
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