AIFs may gain at the expense of MFs with market poised for shift in favour

Alternative investment funds (AIFs) may gain at the expense of mutual funds (MFs), with the market for credit risk products poised for a shift in their favour.

Unlike MFs, Category-I and II AIFs have a closed-ended structure and are not exposed to the risk of sudden redemptions. This means these can match asset-liability profiles better, making them an attractive proposition for wealthy investors. Currently, credit risk strategies are run in Category-II AIFs and have assets far lower than that in mutual funds.

The problem arises when liabilities are not matched or open-ended, and the loans or investments are of longer