AIF AUM grew 71% to reach Rs.2.82 lakh crore last fiscal

Alternative investment funds (AIFs) witnessed an impressive growth of 71% in their assets under management last fiscal.

SEBI’s latest data shows that the commitment raised (equivalent to AUM in MF parlance) as on March 2019 has increased to Rs.2.82 lakh crore from Rs.1.65 lakh crore in the corresponding period last year.

The growth was largely due to rising interest of HNIs in private equity (PE) funds and structured debt funds. The commitments raised in Category 2 funds which invest in these funds have grown dramatically from Rs.1.05 lakh crore in March 2018 to Rs.2.05 lakh crore in March 2019, a massive 94% growth in its AUM.

These funds offer exposure to assets in which traditional mutual funds schemes do not invest. Currently, majority of the funds in this category invest in private debt. As private debt funds provide customised loans to corporates, it allows the schemes to charge a premium, which is not possible in the case of traditional debt investments.

Similarly, Category 3, which includes hedge funds, saw a massive jump of 38% in its commitments. The commitment raised in this category has gone up to Rs.43,255 crore in March 2019 from Rs.31,261 crore in the corresponding period last year.

Category 1 recorded a healthy growth of 20% in commitments raised. Category 1 AIFs invest in start-ups or early stage ventures, social ventures, SMEs or infrastructure funds. This category has raised commitments worth Rs.33,534 crore as on March 2019 as against Rs.28,036 crore in March 2018.

While infrastructure funds have raised commitments of Rs.12,082 crore, the AUM of social venture funds and venture capital reached Rs.1,314 crore and Rs.2,19,875 crore respectively as on March 2019.

In terms of share, a majority of the industry’s assets (73%) is in category 2 funds. The remaining assets are divided between category 3 at 15% and category 1 at 12%.

Experts attributed this to the growing popularity of AIFs among HNIs. “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,” said a senior official from a private wealth firm.

Another key reason, which experts have pointed out, is the volatility in the equity market which is making HNIs move to alternative funds.

Currently, AIFs have a limited set of investors such as corporates, UHNWIs and PSU banks because of the Rs.1 crore ticket size.

IFAs can also sell AIFs. The commissions offered by AIFs are comparatively better than other market linked financial products.

Commitment raised by AIFs over the last one year

Source: SEBI