Specialized Investment Funds: The next investment frontier for an affluent India

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Subscribe to enjoy similar stories. India’s capital market participation has got a significant boost with the introduction of a new investment product category: Specialized Investment Funds (SIFs). Not long ago, the nation needed campaigns like Mutual Funds Sahi Hai and SIPs Sahi Hai to encourage awareness.

Today, stockbroking platforms are mandated to caution investors about the risks of futures and options (F&O) trading. This stark shift reflects the evolution of post-pandemic Indian retail investors. In less than five years, this cohort has leapfrogged a decade in terms of capital market participation, risk appetite, and behavioural maturity across market cycles.

India's household financial assets are growing at a compound annual growth rate (CAGR) of ~12% per Reserve Bank of India (RBI) estimates, with equities and mutual funds capturing a larger portfolio share. Millennials now contribute nearly 25% of mutual fund inflows, showcasing demand for advanced instruments. From FY20 to FY24, mutual fund assets under management (AUM) grew ~24% CAGR, portfolio management services (PMS) ~16%, and alternative investment funds (AIF) commitments ~32%, reflecting robust growth across asset classes.

Historically, mutual funds were viewed as wealth-creation tools, while conventional instruments were synonymous with smart savings. However, mutual funds have transitioned from aspirational to foundational, often replacing conventional instruments, which now rival savings accounts in preference. As mutual funds occupy the must-have seat, the gap between them and higher-ticket offerings like PMS and AIFs has widened significantly.