HNIs have taken a shine to alternate investment funds. The latest SEBI data shows that the commitment raised by AIFs has increased by 103% from Rs. 24,873 crore in June 2015 to Rs. 50,441 crore in June 2016.
Commitments raised by AIFs
There are three types of AIFs – Category I, Category II and Category III. The highest jump, in percentage terms, was recorded by Category III which includes hedge funds. The commitment raised in this category has gone up to Rs. 6,245 crore as on June 2016 from Rs. 2,123 crore in June 2015. These funds trade with a view to make short term returns by employing diverse or complex trading strategies. They also employ leverage by investing in listed or unlisted derivatives. “The markets have gone up in the recent past which is why HNIs are back to equities,” added Vikas V Gupta, Head- Research & Product Development, Arthveda Fund Management.
Category II AIFs account for the largest (65% or Rs. 32,696 crore) share in the total Rs. 50,441 crore AIF pie. Category II AIFs raised the highest commitment of Rs. 18,787 crore, in absolute terms, which went up from Rs. 13,909 crore in June 2015 to Rs. 32,696 crore. Category II AIFs are private equity funds, debt funds and fund of funds. “Funds which come with 5-7 years lock in are going out of favour now with HNIs. They are looking for a combination of regular pay out with a shorter lock in of three years which these funds offer,” points out Vikas. Market participants say that a slew of new product launches is also helping this category raise healthy commitments.
The commitments raised by social venture funds increased from Rs. 596 crore in June 2015 to Rs. 748 crore in June 2016. These funds come under Category II AIFs. “These funds are new to India. A lot of family offices have committed money to such funds. While very large family offices directly invest in companies operating in this segment, the mid-sized family offices invest through AIFs because their allocation is not so big,” says Vikas.
Barring infrastructure funds, all AIF categories recorded a jump in their assets.
Currently, AIFs have a limited set of investors such as PSU banks, corporates and HNWIs because of the Rs. 1 crore ticket size. To attract a bigger pool of investors, SEBI has recently allowed Foreign Portfolio Investors (FPIs) to invest in units of REITs, Infrastructure Investment Trusts (InvIts) and Category III AIFs.
IFAs can also sell AIFs. The commissions offered by AIFs are comparatively better than other market linked financial products. However, only a few advisers are selling these products because of the high minimum ticket size, which is typically Rs. 1 crore and above.
As on June 2016, there are 235 AIFs registered with SEBI.
