 "alternative investment funds, AIFs")
Investment schemes for sophisticated investors are seeing a drop in the share of foreign capital in the total funds raised.
Foreign investors’ share in alternative investment funds’ (AIFs’) gross fundraise was at 34.8 per cent for the three months ending September 2025. This compares to 40.9 per cent in the three months to March 2024, the earliest period for which the split was available. Every quarter in between has seen a decline in foreign share of funds raised. This is even as the overall gross funds raised has risen to ₹7.3 trillion in September 2025 compared to ₹4.8 trillion in March 2024.
Schemes in the AIF segment have a minimum ticket size of ₹1 crore, though many have higher thresholds of ₹5 crore or more.
They can invest across various segments including start-ups, real estate, debt securities and even use complex strategies to bet on the stock market. Both individual and institutional investors allocate capital to AIFs for exposure to investment opportunities that are often unavailable elsewhere. But AIFs have seen a drop in funds raised from foreign portfolio investors (FPIs) as well as foreign venture capital investors.
Non-resident Indians (NRIs) and others have invested larger amounts which has led to a higher overall value of foreign
fundraising since March 2024. Domestic investors’ fundraising has grown faster leading to an overall decline in the share of foreign investors. The value of FPI fundraising has dropped by over 90 per cent to ₹1,410 crore in September 2025 from ₹18,426 crore in March 2024. This has coincided with large-scale FPI outflows of ₹1.54 trillion from equity markets; though they invested a larger amount into debt and hybrid securities.
Foreign investor sentiment in general has been negative given depreciation in the rupee, tariff uncertainty and the border
flare-up earlier in the year, said Praveen Jagwani, chief executive officer (CEO) at UTI International. Returns in the US markets have been spectacular particularly for the Magnificent 7 (called Mag 7, technology-led stocks like Google-parent Alphabet, Apple, Tesla, Meta, Microsoft, Nvidia and Amazon), pointed out Jagwani.
“Real experience has reinforced the belief that all you need to do is Mag 7 and you will do better than most,” he said.
Any emerging market bets outside the US have also been technology plays whether it is South Korea, Taiwan or China. India doesn’t have similar technology-focused companies to draw FPI interest, though non-resident Indians (NRIs) continue to invest in various other opportunities. “Anecdotally, that seems to be true... there’s a lot of technocrats who have set up family offices in Dubai and Singapore for example. Since they know the landscape very well, they tend to be willing to make large allocations,” Jagwani said.
Domestic fundraising has grown 67.1 per cent since March 2024 compared to a 28.5 per cent increase for foreign fund-raising.
“Investors in AIFs have gotten a lot more familiar and comfortable with the product,” said Shardul Amarchand Mangaldas & Co partner Jay Gandhi.
There is interest in India’s private credit market that UTI has seen for its AIF focused on the segment, said Jagwani.
The US private credit market is facing headwinds among smaller and medium-sized companies due to rising delinquencies in segments like automobile loans and credit card payments.
India offers higher dollar returns on performing companies in the private credit market even without leverage, according to Jagwani, though currency fluctuations remain a challenge.
