Alternative investment funds: Dispelling myths and unlocking potential
Subscribe to enjoy similar stories. Alternative Investment Funds (AIFs) in India have achieved a significant milestone, crossing an estimated ₹5 trillion in funds raised, with investment commitments surpassing nearly ₹12 trillion as of September. Despite this growth, AIFs represent just about 5% of India's GDP, a stark contrast to an approximately 50% in the US and around 10% in the UK, underlining immense growth potential.
Read this | AIFs face risk of large investors moving away as Sebi tightens rules Compared to Mutual Funds (MFs) with assets under management (AUM) worth around ₹67 trillion, AIFs clearly have a long way to go. However, the sector's growth is hindered by myths that often stem from anecdotal evidence, oversimplification, or misrepresentation. Let’s debunk these misconceptions: While alternatives like private equity and venture capital were once exclusive to institutional investors, this has changed.
Today, individual investors can participate in AIFs through staggered investment plans over two to three years or direct investments in startups. Factors such as India's rising number of millionaires, innovative business ideas, and the need for portfolio diversification with better risk-adjusted returns are driving AIF adoption. Professional fund management, regulatory reforms, and enhanced transparency further bolster this trend.
All investments carry risk, but many alternative assets can offer stability, particularly against market volatility or inflation. For instance, absolute return strategies aim to deliver consistent returns regardless of market direction. Read this | Are alternative investments worth the risks involved? AIFs with exposure to derivatives or real estate often have low correlation with
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