Alternative investment funds (AIFs) have witnessed an impressive growth of over 64% in their assets under management in just one year. The commitment raised (equivalent to AUM in MF parlance) as on September 2015 has increased to Rs.27,496 crore from Rs.16,737 crore in the corresponding period last year, shows SEBI data.
The growth was largely due to rising interest of HNIs in private equity (PE) funds. The commitments raised in Category II funds which invest in PE funds has doubled from Rs.8,500 crore in September 2014 to Rs.14,700 crore in September 2015. While PE firms have raised fresh funds of Rs.7,860 crore, these firms have invested Rs.6,800 crore in the HYFY 2015-16.
Similarly, Category I recorded a growth of 35% in commitments raised. The AIF Category I funds invest in start-up or early stage ventures, social ventures, SMEs or infrastructure funds. This category has raised commitments worth Rs.9,274 crore as on September 2015 as against Rs.6,887 crore in September 2014.
While infrastructure funds have raised commitments of Rs.6,876 crore, the AUM of social venture funds and venture capital reached Rs.601 crore and Rs.1,642 crore respectively as on September 2015.
Interestingly, Category III which includes hedge funds, saw a massive jump in its commitments. The commitment raised in this category has gone up to Rs.3,516 crore as on September 2015 from Rs.1,357 crore in the corresponding period last year.
Sriram Iyer, Chief Executive Officer, Wealth Management, Religare Private Wealth attributed this growth to gaining popularity of AIFs among HNIs. He had earlier told Cafemutual that this growth is largely on account of inflows in real estate through private equity and venture capital route. “HNIs tend to chase stable returns which they expect to find in real estate AIF. In addition, ‘pass through’ taxation status has helped the AIF industry to grow,” he said. The Budget 2015 has accorded tax pass-through status to all AIF categories.
“Since equity market is a bit volatile and delivered negative returns this calendar year, HNIs have moved to other asset classes like alternative investments. In fact, a few structured products in AIF space guarantee capital protection along with appreciation. HNIs are finding such schemes lucrative,” said Vikas V Gupta, EVP – Traded Market & Investment Research, Arthveda.
A recent Karvy Wealth Report 2015 showed that the total individual wealth in alternate assets including Alternate Investment Funds (AIFs) stood at Rs.41,960 crore in FY15, growing by 77% from the previous financial year. However, the report has included structured products and gold ETFs.
Another report called ‘Top of the Pyramid 2015’ released by Kotak Wealth Management said that 40% of ultra-rich preferred to invest in IT and e-commerce industry through PE investments and 39% of them preferred to invest through venture capital (VC) route. After technology, real estate and financial services were the second and third most preferred sectors for investments through PE and VC route, states the report.
As on September 2015, there are 158 AIFs operational in India.
Financial advisers can distribute AIFs; however, only a few advisers are offering this product to their clients. The minimum ticket size under AIFs is Rs.1 crore.
