AIF commitments top Rs 13 trillion as HNIs prefer diversification

Data from the Securities and Exchange Board of India (Sebi) shows that total funds raised by AIFs reached Rs 5.27 trillion, with total investments exceeding Rs 5 trillion in December

Alternative investment funds (AIFs), a niche investment vehicle catering to the affluent class, reached a total investment commitment of over ₹13 trillion till December 2024, marking a 5 per cent quarter-on-quarter increase, according to data provided by the Securities and Exchange Board of India (Sebi).  

 

The surge in commitments is attributed to the growing wealth of high-net-worth individuals (HNIs) and their inclination towards diversification in a volatile market environment. AIFs raised ₹5.27 trillion, with total investments exceeding ₹5 trillion as of December. On a year-on-year basis, commitments and investments have surged by over 27 percent.

 

AIFs are concentrated within institutional investors and ultra HNIs. Investments are drawn in tranches, leading to funds raised trailing the commitment amount.

 

Investment commitments in Category II AIFs, which include real estate funds, private equity funds, and distressed funds, crossed ₹10 trillion for the first time in the December 2024 quarter. The AIF industry reached the ₹10 trillion commitment milestone in just 10 years as compared with over 20 years taken by private sector mutual funds.

 

“Within AIF industry, the private credit industry has grown at an even faster pace, accounting for 15 per cent of the AIF commitments against 6 per cent just five years ago. Need for diversification, higher real return and regular income are key demand-side growth drivers for the private credit segment,” said a spokesperson from Northern Arc.

 

Northern Arc reported over 40 per cent year-on-year growth in fund assets, including commitments and fund maturity, in the first nine months of the current financial year. Private credit funds have seen a significant increase in investor interest, driven by the need for diversification, higher real returns, and regular income.

 

“Credit AIFs have seen a substantial uptick in investor interest in the last few years within the broader alternatives spectrum. Banks and mutual funds vacating the mid-market corporate lending or investing space meant that there was a robust investment pipeline with the right risk-adjusted returns. Investors have also experienced higher returns from these relatively stable products and are expected to continue allocating to this segment due to the ongoing equity market volatility,” said Raghunath T, Head-Credit, Vivriti Asset Management, which raised over ₹4,800 crore of investor commitments towards the private credit strategies till December.

 

While domestic investors continue to remain the top contributors, over 65 per cent of the total investments of AIFs are in unlisted assets. Though most sectors saw increased investments in the December quarter, real estate investments declined marginally from ₹75,000 crore to ₹73,900 crore. IT/ITeS, and financial services investments surged to ₹30,300 crore and ₹26,800 crore, respectively.

 

Sebi is considering steps to ease norms for angel funds, including proposing to include accredited investors in the definition of qualified institutional buyers (QIBs) for investments in such funds. Angel funds, which fall under Category I of AIFs, had a commitment of ₹8,700 crore until last December.

 

In Rs trillion	Commitments	Funds raised	Investments made
Dec-19	3.47	1.71	1.42
Dec-20	4.41	2.12	1.84
Dec-21	6.09	2.97	2.67
Dec-22	7.51	3.49	3.23
Dec-23	10.23	4.29	3.99
Dec-24	13.05	5.27	5.06

 

Key segments	Investments (Rs trillion)
Equity/equity linked	3.26
Debt securities	1.19
Reits/InvITs	0.23
Security reciepts	0.03
Source: Sebi
Data as of December 2024