HNIs, family offices chase returns abroad as Indian markets underperform

With domestic equities lagging global markets, high-networth individuals (HNIs) and family offices are increasingly diversifying into offshore assets through portfolio management services (PMS) and alternative investment funds (AIFs) housed in Gujarat International Finance Tec-City (GIFT City). 

The shift is evident from a sharp rise in AIF allocations overseas. 

As of June, investments into foreign jurisdictions stood at $1.43 billion, up nearly 70 per cent from $842 million at the end of March. Meanwhile, PMS assets operating out of GIFT City climbed 23 per cent to $1.46 billion during the April–June quarter, up from $1.18 billion at the end of March 2025. 

Experts said the trend is being driven by underperformance in Indian stocks versus global peers. Between January and August 2025, the MSCI Emerging Markets (EMs) Index gained 24 per cent, MSCI World climbed 11 per cent, and MSCI Europe surged 26 per cent, while MSCI India increased just 2 per cent. 

“There is a rising investor inclination towards small and midcaps listed in Europe and North America, specifically those that are segment leaders. With valuations in those markets at lower levels compared to India, many of these developed-market companies are growing twice as fast as Indian companies but trading at half the valuations,” said Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers. His firm’s outbound investment strategies via PMS and Category III AIF structures at GIFT City have already scaled to ₹300 crore in assets, with commitments of ₹500 crore expected in the next six to 12 months. These allocations are being channelled through the  overseas portfolio investment route, he added. 

PMS players said the trend reflects a sustained build-up, even though assets are lower than last year’s peak, as domestic markets have cooled off. 

The number of PMS clients in GIFT City jumped to 221 in June from 144 in March. Several major fund houses, including PhillipCapital, Mirae Asset Investment Managers (India), DSP Asset Managers, and Aditya Birla Sun Life Insurance, have also rolled out investment strategies from the tax-friendly hub. 

Prashant Tandon, executive director and head of global investments at Waterfield Advisors, said that PMS in GIFT City provides an institutional route for global diversification for Indian HNIs, without each investor exhausting their $250,000-a-year Liberalised Remittance Scheme quota individually. 

Additionally, the financial centre has emerged as a tax-efficient gateway. 

“Concerns like earnings downgrades, tariff issues, regulatory unpredictability, and rupee depreciation drive investors to seek hedges. Global PMS/AIFs give access to specialist managers with deep experience in the US, Europe, or EMs. This is preferable for HNIs over do-it-yourself investing, which is constrained by knowledge gaps, time, and regulatory complexities,” said Tandon.