The Alternative Investment Fund (AIF) industry in India is developing and lies at the cusp of exponential growth. It is important to understand that investor capital is limited and thus, needs to be optimally allocated across different investment solutions.
Institutional capital will be needed for the next leap of growth in the industry. Globally, the most considerable investors in alternative investments are institutions, and domestic institutional capital from pension and retirement funds, sovereign funds, insurance funds, etc., can further propel industry growth, says the organisation which published the report.
However, optimal allocations can occur only if there are standardised measures and information references that can facilitate comparison not just in terms of returns but also in terms of strategies, fund manager pedigree, risk, etc.
Due to its unique nature of risk and reward, the multi-asset strategy fits into the HNI/UHNI portfolio aptly. It offers liquidity, resilience, and the possibility of taking advantage of equity with much lower draw-downs. As an HNI/UHNI, at least 10 per cent of the portfolio should be in the multi-asset category. "With rising affluence and a preference for a wider variety of risk-return combinations that can be generated across asset classes, AIFs are emerging as strong alternatives to grow wealth and investments. Recent years have seen the global alternative industry grow at a rapid pace. This is largely driven by a need to enhance returns and increase diversification", said Amit Saxena, director and head of Alternative Investment Funds, Dolat Capital Market Private Ltd, who published the report.
The AIF industry is the fastest-growing investment forum in India when compared with the traditional mutual fund or portfolio management serviced (PMS) industry. Assets under management in AIFs have expanded by more than 70 per cent in the previous 5 years vs. 14-16 per cent for MF/PMS. Globally, the AIF Industry is envisioned to rise to 17-20 per cent of the total industry Assets Under Management (AUM) by 2024, and around 50 per cent of the alternative asset growth is likely to come from emerging markets.
