MUMBAI: Despite the Reserve Bank capping investments by banks and other financial institutions in alternate investment fund (AIF) schemes at 10%, overall investor commitments to AIFs rose 20% on-year to a record Rs 14.2 trillion as of June 2025, with funds raised touching Rs 6 trillion and deployments from such funds crossing Rs 5.72 trillion, according to Sebi data.
The AIF industry has been rocking with the rising inclination of ultra high-networth individuals and family offices to deploy their monies in high yielding investment options like AIFs. These schemes have gained traction also because of their ability to diversify investments in early stage startups, unlisted assets, and complex trading strategies. As a result the total commitments for AIFs surged to Rs 14.2 trillion as of June 2025, which is a 20% jump on-year and 5% growth sequentially.
Also, total funds raised inched closer to Rs 6 trillion mark while total investments made through such funds rose to Rs 5.72 trillion, according to the latest data from the Securities and Exchange Board (Sebi).
AIFs are pooled investment vehicles catering to the niche segment with high entry investments. Recently, the market regulator has pushed for accreditation among investors for certain schemes.
Category II AIFs focus on private equity, debt, and other unlisted assets, continue to dominate the segment with highest commitments at Rs 10.78 trillion. But of late there is also a rising inclination towards category III AIFs which include hedge funds. According to the report by the industry association IVCA, category III AIFs accounted for 47% of the total launches this financial year so far.
In terms of investments, real estate is the largest accounting for nearly 12.5%, followed by financial services, IT, NBFCs, and banks.
It can be noted that in early June, the Reserve Bank, which has been frowning upon the mushrooming of AIFs for quite sometimes, has capped the cumulative investments by banks, non-banks and all-India financial institutions at 10% of their corpus of any single entity exposure 20%. The new directions will be in force from January 1, 2026 and will apply to all banks, cooperative banks, non-banks, all-India financial institutions and housing finance companies.
More importantly, the RBI has also mandated 100% provisioning by the investing entity in case of breach of the new investment caps, either individually or collectively.
The domestic alternative assets market is estimated at $400 billion in terms of AUM, is projected to grow 5x to $2 trillion over the next decade.
According to an India Brand Equity Forum report, the domestic AIF industry, which includes category II and III funds and also private credit funds, had commitments worth Rs 13 trillion or $150 billion as of December 2024. The global AIF industry is a little over $20 trillion.
Of this, category II AIFs are regulated by Sebi, including private equity, real estate, and distressed asset funds, comprised Rs 10 trillion and the private credit segment accounted for 15% of total AIF commitments at Rs 1.95 trillion or $22.39 billion.
As of May 2025, there are 1,550 registered AIFs in the country, and the investment commitments into AIFs surged nearly 110% in fiscal 2025 over fiscal 2022. The industry is projected to surpass Rs 100 trillion or $1.15 trillion by 2030.
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