AIF commitments near ₹16 trn as regulatory liberalisation lifts outlook

Data from Sebi showed that investments by AIFs climbed 27 per cent over the year to Rs 6.45 trillion as of December 2025, while total funds raised since inception stood at Rs 6.78 trillion

Even as equity markets remain tepid, alternative investment funds (AIFs) are gaining traction among affluent investors, with commitments nearing Rs 16 trillion as of December 2025 — up nearly 20 per cent year-on-year (Y-o-Y).

 

Data from the Securities and Exchange Board of India (Sebi) showed that investments by AIFs climbed 27 per cent over the year to Rs 6.45 trillion as of December 2025, while total funds raised since inception stood at Rs 6.78 trillion.

 

Commitments are typically drawn down in tranches by fund managers and reflected progressively in the funds raised.

 

AIFs — pooled investment vehicles designed for sophisticated investors — carry a minimum investment threshold of Rs 1 crore, though accredited investors are permitted to invest smaller amounts. These funds invest across a wide spectrum of assets, including infrastructure, MSMEs (micro, small, and medium enterprises), startups and, in the case of Category III AIFs, complex trading strategies. 

“As of now, approximately $75 billion has been deployed across AIFs, reflecting steady capital drawdowns and investments across PE (private equity), real estate, private credit, and venture capital (VC). Category II AIFs dominate the ecosystem due to a wider investment scope, and they account for the bulk of commitments and investments," said Anil Joshi, founder and managing partner of Unicorn India Ventures, and VC Council member, IVCA.

 

While domestic participation has remained strong, foreign portfolio investor (FPI) inflows into AIFs have declined sharply over the past two years, mirroring broader equity market outflows.

 

Gross funds raised from FPIs fell steeply to Rs 1,196 crore as of December 2025, from Rs 18,426 crore in March 2024.

 

In contrast, contributions from non-resident Indians (NRIs) rose sharply during the same period, increasing from Rs 15,106 crore to Rs 24,288 crore.

 

“AIFs have seen growing acceptance among domestic investors, especially in the unlisted space, due to growing geopolitical, cross-border tensions for FII (foreign institutional investor) investments, and overall lukewarm performance in equities. Further, regulatory liberalisation for AIFs by the market regulator has also helped in boosting participation,” said Punit Shah, partner, Dhruva Advisors.

 

Real estate continued to attract the highest investments, at around Rs 75,350 crore, followed by financial services at Rs 59,500 crore. In recent quarters, financial services has overtaken information technology (IT) in terms of investments, Sebi data showed.

 

Recent regulatory relaxations are expected to further support AIF inflows. Last month, the Pension Fund Regulatory and Development Authority (PFRDA) permitted investment of National Pension System (NPS) funds in AIFs, subject to specified caps and conditions.

 

Separately, the Reserve Bank of India (RBI) last year eased norms governing investments by banks and non-banking financial companies (NBFCs) in AIFs.

 

The central bank capped cumulative exposure to AIF schemes at 20 per cent, with a 10 per cent limit for a single entity, offering relief after earlier curbs aimed at preventing evergreening of loans.