Where do AIFs largely invest?

AIFs invest 20% of their total assets in real estate as on March 2023, shows SEBI data. On the other hand, IT/ITes has the second-highest allocation at 6.3%. Notably, the deployment in the financial services sector also stands similarly at 6.1%.

Likewise, the fourth-highest apportionment is seen in the NBFC space at 5.3% and banks follow next with a 4% share.

Pharmaceuticals (3.7%), FMCG (3.2%), health care providers and services (3.1%) and insurance (2.7%) receive the next-highest allocation in the said order.

However, other sectors besides these collectively receive a noteworthy proportion of 45.4%.

Notes:

1. Banking and financial services exclude NBFCs

2. Data w.r.t sector-wise deployment of funds is reported by AIFs which do not take leverage

In the case of instrument type, the largest allocation is towards unlisted equity shares/equity-linked instruments/LLP interest at 41.4%, followed by 27.9% in debt/securitised debt instruments.

On the other hand, listed equity (excluding listed/to be listed on SME Exchange) has the third-largest apportionment of 19.6%. Other instruments with modest allocation include liquid funds (3.7%), units of other AIFs (2.4%), and listed/to be listed securities on SME Exchange (0.04%).   

How have the AIF numbers changed over the last year?

As against March 2022, AIF numbers as on March 2023 showcase a positive trend.  

Apart from a 22.9% rise in the number of registered AIFs, the total AUM i.e. commitments raised across category 1,2 and 3 recorded a 30% jump. Funds raised and investments made also went upwards.

Commenting on this trend, Deepak Sood, Partner and Head Fixed Income, Alpha Alternatives said, “AIFs are emerging as a prominent platform for diverse investment strategies across various asset classes. Notably, sophisticated investors such as family offices, corporate treasuries, and high-net-worth individuals are actively participating in this space. The increase in the number of registered funds, growth in AUM, and the expansion of investment strategies all validate this trend.”

He added, “Furthermore, changes in taxation regulations have prompted a transition from traditional fixed income products to structured credit strategies within the AIF framework. In both equities and structured credit, sector-agnostic strategies are gaining popularity due to their ability to access a broader investible universe”