Alternative Investment Funds (AIFs), which have seen stupendous growth in recent years on the back of high-networth investors, have made history by making investments totalling Rs 4.07 lakh crore as of March 2024 in the Indian markets. This marks 20% absolute growth over March 2023 (Rs 3.37 lakh crore) and 270 odd percent rise over March 2019 (Rs 1.09 lakh crore).

While AIFs as a whole took over 7 years to surpass the Rs 1 lakh crore figure (2019), the next milestones such as Rs 2 lakh crore (March 2021), Rs 3 lakh crore (June 2022) and Rs 4 lakh crore were hit in much quicker time as the AIF industry gained faster traction and investment returns attracted new investors. Just to put things in some perspective, it took the retail-oriented MF industry 14 years to cross Rs 4 lakh crore assets under management (which strictly may not be comparable with AIF investments).

Over the last 12 months (March 2023 to March 2024 period), the incremental investments of Rs 69,000 crore have helped push the total AIF investment mark beyond Rs 4 lakh crore. This addition has been spearheaded by Category II AIFs, including those investing in real estate, distressed assets and private equity, with Rs 33,118 crore. Category III AIFs, including hedge funds, come second at Rs 27,436 crore. Category I AIF came in third by adding Rs 8,510 crore. On a percentage growth basis, Category I AIFs with a lower base show the fastest year-on-year rise of 35%. Category II AIFs, which boast the highest investment base among the three, statistically show the slowest y-oy growth of 14%. Category III AIFs showed YoY growth of 39%.

Category I AIFs, where sub-category data is available, show interesting trends in the last 1 year. As of March 2024, Category I AIF - Venture Capital Funds with Rs 21583 crore investments showed a 14% uptick and Category I AIF - Infrastructure Funds with Rs 5,449.92 crore investments witnessed a 15% growth. Category I AIF - SME Funds saw a massive jump of 1096% investment rise, albeit on a small base. Comparable numbers for Angel Funds (VCF) are not available.

Interestingly, close to two-thirds of current AIF investments are in equity or equity-linked securities, while less than one-third are in debt or debt-linked assets. Across asset classes, the Rs 4.07 lakh crore invested by AIFs is spread across 10 sectors. Real estate gets the lion's share of 16.8%, followed by 'Others' (6.6%), IT/ITeS (6.1%), Financial Services (5.3%), NBFCs (4.7%) and Banks (4.4%). Pharma, FMCG, Retail and Renewables get between 2.6-3.4% each.