India's Alternative Investment funds may cross USD 2000 Bn by 2027 from USD 400 Bn now: Avendus

ANI January 2, 2025 383 views

The Indian investment landscape is experiencing a massive transformation with alternative investment funds poised for exponential growth. High-net-worth individuals are increasingly looking beyond traditional assets like real estate and gold. Regulatory reforms and a burgeoning affluent population are creating unprecedented opportunities in the alternatives market. Experts predict alternative investments could become a critical component of wealth management strategies in the coming years.

"Rising HNI & UHNI wealth which is expected to become USD 2,000 Bn by 2027 will drive a higher appetite for differentiated products" - Avendus Report
New Delhi, January 2: The landscape of alternative investments in India is undergoing a significant transformation driven by the rapid rise of high-net-worth individuals (HNIs), says a report by Avendus.

Key Points

1

Alternative investment funds projected to double in size by 2027

2

HNI wealth driving significant portfolio diversification

3

Regulatory environment supporting alternative investment growth

The report highlighted that investments in the country traditionally focused on illiquid, physical assets like real estate and gold, are now gravitating towards alternative assets, seeking higher returns as public equity markets struggle to generate substantial alpha.

It said, "Rising HNI & UHNI wealth which is expected to become USD 2,000 Bn by 2027 will drive a higher appetite for differentiated products like AIFs which offer better alpha generation opportunity".

The report estimates domestic alternatives assets under management (AUM) of around USD 400 billion and added that there exists a substantial opportunity for growth.

The report said, "India's AIF market is estimated to be c. USD 400 Bn currently. Middle income families will continue to witness growth given the rising appetite from middle income & solid underlying instruments"

The favourable regulatory environment, high levels of corporate governance, and a burgeoning population of affluent investors provide robust structural tailwinds.

Moreover, alternatives are outperforming traditional asset management companies, further highlighting the potential for improved profitability and valuation premium in this evolving market landscape.

As the demand for professionally managed wealth increases, investors are progressively allocating significant portions of their portfolios to alternatives, resulting in a paradigm shift in investment strategies.

Factors such as regulatory reforms, the increasing allocation of HNI wealth to alternative investment funds (AIFs), and the emergence of new asset classes like private credit and real assets reflect this trend.

"With the number of HNIs and UHNIs expected to become 2x over the next 5 years, wealth management AUM is expected to grow exponentially" the report added.

The increasing number of HNIs and their wealth will further amplify this shift, as these investors seek differentiated products that enhance returns and mitigate risks.

"While HNIs have a low share of AIFs as part of their managed wealth (c.7-8 per cent), over the next decade, participation of HNIs in alternatives is a key growth driver, with AIFs' share expected to double to 15% of HNIs' managed wealth" said the report

Overall, the confluence of these trends positions India's alternatives sector for a thriving future, drawing parallels with successful global dynamics.

Reader Comments

R
Rahul K.
This is exciting news for India's financial markets! 🚀 I've been considering diversifying into AIFs and this report confirms it might be the right move. The growth projections are impressive!
P
Priya M.
While the growth potential is undeniable, I think the report underestimates the risks involved. Many middle-class investors jumping into alternatives might not fully understand the illiquidity and volatility. More investor education is needed.
A
Arjun S.
Finally moving beyond gold and real estate! This shift shows how sophisticated Indian investors are becoming. The regulatory environment has improved so much in recent years.
N
Neha P.
Interesting read! I wonder how much of this growth will trickle down to smaller investors through platforms that allow fractional investments in AIFs. The democratization of alternative investments could be the next big thing.
V
Vikram J.
The private credit space in India is particularly exciting. With banks being cautious, there's a huge opportunity for alternative lenders to fill the gap. This could be great for SMEs too!
S
Sunita R.
As someone who's been investing in AIFs for 3 years now, I can confirm the returns have been better than my mutual funds. But it's not for everyone - you need patience and risk appetite. Do your research first!

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Your email won't be published

Tags:
Alternative Investments Wealth Management Indian Finance
You May Like!