AIF commitments top US$ 119.2 billion (Rs. 10 trillion) for the first time amid rising demand from HNIs.

The investment commitments received by Alternative Investment Funds (AIFs) have surpassed US$ 119.2 billion (Rs. 10 trillion) for the first time, driven by increasing demand from affluent investors seeking higher returns compared to traditional investment avenues. As of December 2023, the investment commitments amounted to US$ 129.2 billion (Rs. 10.84 trillion), marking a 13.6% increase quarter-on-quarter and a significant 40% rise year-on-year. According to data from the Securities and Exchange Board of India (Sebi), AIFs have raised approximately US$ 51.3 billion (Rs. 4.3 trillion), with US$ 36.9 billion (Rs. 3.1 trillion) directed towards Category II AIFs, which engage in both debt and equity investments.

AIFs serve as pooled investment products tailored for high-net-worth individuals (HNIs) with a minimum ticket size of US$ 1,19,189.5 (Rs. 1 crore). The recent alteration in the taxation of debt mutual funds and market-linked debentures in Budget 2023 has propelled AIFs focusing on private credit to gain considerable traction. While the AIF industry has experienced several regulatory adjustments in the past year, such as dematerialization for funds exceeding the threshold, fee structure revamps, benchmarking, and valuation norms enhancements, experts suggest that the recent limitations imposed by the Reserve Bank of India (RBI) on investments from banks and non-bank financial companies (NBFCs) could potentially decelerate the inflow pace into AIFs. The RBI's directive to banks and NBFCs to either liquidate or provision for their investments in AIFs with debtor connections aims to prevent loan evergreening practices.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.