AIF assets have grown faster than MF and PMS assets in the last 5 years

A recent report by SBICAPS on AIFs shows that AIF assets have grown faster than MF and PMS assets in the last 5 years.

From March 2019 to June 2024, AIF commitments have grown by 420% from Rs. 2.80 lakh crore to Rs. 11.80 lakh crore. The investments made in AIFs have grown by 390% in this period from Rs. 1.10 lakh crore to Rs. 4.30 lakh crore.

On the other hand, PMS assets have grown by 220% while MF assets have grown by 260% during these five years.

AIF investments have also grown more than equity MFs, which have seen a growth of 370% during the last five years.

Here are other key highlights of the report.

Commitment in AIFs

• Commitments in Cat I AIFs have increased from Rs. 40,000 crore to Rs. 80,000 crore from March 2020 to September 2024
• Commitments in Cat II AIFs have seen a growth from Rs. 2.80 lakh crore to Rs. 9.30 lakh crore
• When it comes to Cat III AIFs, commitments have grown from Rs. 50,000 crore to Rs. 1.60 lakh crore

Investments made in AIFs

• Cat I AIF investments have grown from Rs. 10,000 crore to Rs. 40,000 crore during this period
• Investments in Cat II AIFs have increased from Rs. 1 lakh crore to Rs. 2.80 lakh crore in these five years
• Cat III AIFs have also seen a growth in their investments from Rs. 40,000 crore to Rs. 1.10 lakh crore

Asset class wise investments in AIFs

• Investments in unlisted equity has increased from 40% to 42% from March 2020 to September 2024
• Listed equity investment has increased from 21% to 22% in this period
• Debt/securitized debt has seen an increase in investment from 26% to 28%

Growth drivers for AIFs

• Broader trends impacting AIFs include financialization of savings, rising wealth of HNIs, rapid growth of capital markets and evolving ecosystem for start-ups
• Sector specific trends like global economy, growth of AMCs, development of distribution ecosystem and higher potential for alpha generation along side rapidly evolving regulatory ecosystem have also affected the growth of AIFs

Direct and distributor mode share

• Cat I, Cat II and Cat III AIFs have 67%, 51% and 19% investors coming from direct mode respectively as of March 2023
• Overall, direct mode investors have increased from 27% in March 2019 to 42% in March 2023
• AIFs have raised over Rs. 100 crore from more than 50 cities as of March 2023

AIF exposure in various sectors

• Exposure of AIFs in the top 6 sectors: real estate, financial services (excluding NBFCs), pharma & healthcare, NBFCs, IT and FMCG has reduced from 62% in March 2021 to 49% in March 2024
• Other sectors popular in AIFs include energy, infrastructure, stressed assets, retail, industrial products and services
• Apart from these, other new-age sectors which are being explored by AIFs include solar farms, data centers, SaaS, fintech, warehousing and climate technology etc.

Impact of New Asset Class (NAC)

• NAC may take a share from long-only Cat III AIFs due to possible advantage in taxation
• The impact of NAC on Cat II AIFs and long-short Cat III AIFs may be limited due to investment restrictions in leverage, unlisted instruments and other securities.