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A report released by Sundaram Alternates titled ‘From Legacy to Leadership’ shows that AIFs are gaining traction among Indian family offices as a preferred tool for accessing private markets and startups.
The report notes that Indian family offices are increasingly embracing alternative investments, with a projected 5% increase in allocations to 18% over the next three years.
This aligns with the global trend, where family offices allocate more than 50% of their assets to alternatives.
The report attributes the growing interest of family offices in AIFs to diversified portfolio, expertise of AIF managers in selecting opportunities across risk return spectrum and co-investment opportunities.
The report predicts expected shifts in asset allocations for family offices over the next three years. Allocations to mutual funds, PMS, AIFs, and gold are anticipated to see modest increases while fixed income and physical real estate are likely to experience a decrease.
Further, the allocation to startups is expected to remain stable as family offices continue to explore and capitalize on opportunities in this sector.
Here are the other key findings of the report:
- AUM of mid to large-sized family offices in India will grow at a CAGR of 14% over the next three years
- The mindset of family offices has evolved from wealth preservation to growth
- Despite the promising growth and diversification, family offices face significant challenges in attracting and retaining talent
- The competition for talent with large wealth managers and asset managers is fierce and family offices require specific skills such as understanding the family vision, aligning with the parent entity’s philosophy, and navigating complex family dynamics
Vikaas M Sachdeva, Managing Director of Sundaram Alternates, said, "Family offices in India are at a pivotal juncture where the integration of traditional values with modern investment strategies is driving significant growth. Our report underscores the importance of governance, diversification, and talent management in shaping the future of family offices. As they navigate this complex landscape, it is crucial that they remain agile and forward-thinking to capitalize on emerging opportunities and sustain their legacy across generations."