With the rise in the number of HNIs in India, there has also been an increase in their interest in seeking personalized solutions to help them diversify and grow their wealth (at a much higher rate than commonly available investment options). Few years back, they had only portfolio management services (PMS) to manage their wealth and generate returns higher than the market or mutual funds. But in the last few years, Alternate Investment Funds (AIFs ) have become a preferred choice for many wealthy individuals. The figures substantiate this. As of March 2023, the AUM of AIFs totalled INR 8.34 lakh crore according to SEBI data. In March 2019, that figure was INR 2.82 lakh crore, which is an increase of more than 4x in the last five years. Also, the industry has witnessed a steep increase in the number of AIFs in the country from mere 366 in 2018 to above 800 in 2022.
So what is driving the growth of AIFs? “The growth in AIF commitments is a cumulative effect of multiple factors. As existing managers raise larger funds and new managers emerge in every vintage, we are seeing growth in the participation of domestic capital being committed to AIFs. Also, there is a clear refinement in the quality of founders with know-how from winners and downfalls that the PE/ VC ecosystem has seen in the last decade and a half,” says Vaibhav Laxmeshwar, Vice President, Alternative Investments & Fund of Funds, Waterfield Advisors.
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