Alternative investment industry: Opportunities in the Indian market

Have you heard of the term PERMATAGA? This new concept explained by Vikaas M Sachdeva of Sundaram Alternates AMC denotes the alternative investment opportunities and how to capture them in the ever-changing market conditions.

PMS Bazaar conducted its second edition of the Dubai Alternative Investment Summit (DAIS) on February 17, 2024. As part of this event, the company invited various industry experts to share their insights on the Indian alternative industry. One such expert, Vikaas M Sachdeva, Managing Director of Sundaram Alternates, presented the alternative investment opportunities available in India. His topic on the event day was: The rise and rise of PERMATAGA.

Read on to understand more about what he meant by PERMATAGA.

Vikaas M Sachdeva started his presentation by emphasising the importance of change in our ever-evolving world and introduced the concept of PERMATAGA, which stands for Permanent State of: There Are Good Alternatives.

Sachdeva highlighted the rapid pace of change, citing examples like the transition from horse-drawn carts to cars. He showcased a global hierarchy demonstrating that dominance in trade and market performance is fleeting, with new investment themes emerging every decade. He traced this evolution from European stocks in the 1950s to the Nifty 50's success in the US in the 1960s, the oil shock-driven rise of emerging markets in the 1970s, Japan's dominance in the 1980s followed by their stagnation, the dot-com boom of the 1990s, the BRICS formation in the 2000s, and finally, the 2010s saw the US dominate, primarily through FAANG stocks. He pointed out that markets have to wait to see what the 2020 decade will bring.

Sachdeva emphasised the unpredictability of events and recoveries, underlining how even traditionally uncorrelated assets like equities and bonds can move in tandem during crises. He stressed the need for diversification beyond geographical boundaries due to rising volatility across countries.

Sachdeva then pointed to the shifts within India, including evolving consumer preferences, a move away from traditional investments, increasing retail participation in capital markets, and a digital payments boom. He also noted the changing source of credit, shifting from banks to mutual funds and alternative investments. This is where PERMATAGA comes in. He explained a trend across Asia, where AIFs are capitalising on the opportunity presented by the void left by Banks and NBFCs in the private credit sector.

The opportunities in alternative investments

In this ever-changing landscape, Sachdeva argued, suitable alternative investments exist to curate and capture pockets of growth. He highlighted various alternative asset classes such as venture capital, private equity, private credit, real estate, long-only funds, and hedge/long-short funds. He emphasised the ability of Alternative Investment Funds (AIFs) to offer long-short funds and cater to the need for diversification and low correlation to public markets.

Sachdeva asserted that PERMATAGA is playing out, with each alternative asset class witnessing steady growth. He painted a picture of India's evolving alternative investment landscape, showcasing the surge in total committed capital from around 11,000 crore in FY13 to over Rs 10 lakh crore in FY24.

He concluded by stating that enablers like ROSE (Robust Risk Management, Optimal Risk-Adjusted Returns, Seamless Experience, and Emphasis on Quality) are crucial to be a participant or orchestrator in this transformative environment. He showcased data from a Morgan Stanley study where allocation to alternatives reduces the portfolio's overall volatility and improves the potential to generate more returns. He expressed confidence that these enablers, coupled with his team, product offerings, and experience, will capitalise on India's PERMATAGA.

Watch the entire presentation - data-backed insights and other supporting factors for investing in Indian alternative assets.