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The financial landscape is evolving, and investors are steering towards alternative avenues that promise higher returns and portfolio diversification. In this era of growing financial sophistication, assets like private equity, venture capital, and hedge funds are gaining traction, offering the potential for increased returns, albeit with heightened risk.

These alternative investments have fueled a remarkable surge in the Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs) industry, with an estimated Compound Annual Growth Rate (CAGR) of 26%, projecting an impressive ₹43 lakh crore in assets by 2028.

But Why Should Investors Consider these Options in 2024?

A Remarkable Growth Trajectory: PMS and AIFs Outpacing Traditional Markets

Over the past five years (from June FY19 to June FY24), the PMS and AIF industry has exhibited an extraordinary CAGR of 26%, resulting in substantial Assets Under Management (AUM) of ₹13.74 lakh crore as of June FY24. This growth outpaces the mutual fund industry, which boasts a CAGR of 13% and manages an AUM of ₹46.63 lakh crore as of August 2023. The robust growth of the PMS and AIF sector positions it as a dynamic player in the financial landscape.

Driving Factors: Understanding the Surge in Alternative Investments

  • Increasing Income Levels:

The surge in the Indian economy has translated into rising incomes, creating a pool of wealth-seeking investment avenues beyond traditional assets. Alternative investments like private equity and hedge funds attract High-Net-Worth Individuals (HNIs) and Ultra-High-Net-Worth Individuals (UHNIs) aiming for superior returns, albeit with increased risk.

  • India’s IFSC: A Hub for Alternative Investments:

Gift City’s International Financial Services Centre (IFSC) emerges as a pivotal player in the alternative investment realm. IFSC provides a supportive regulatory landscape, and global connectivity, and serves as a gateway to Indian markets, attracting both domestic and international Alternative Investment Funds (AIFs).

AIFs: Pioneering Growth in the Indian Investment Landscape

Alternative Investment Funds (AIFs) have showcased phenomenal growth, recording a CAGR of 36% in the past five years. Category II AIFs, encompassing venture capital, private equity, real estate funds, and private credit, have particularly thrived due to heightened interest from HNIs and UHNIs.

PMS Sector Resilience: Weathering Regulatory Adjustments

Even in the face of regulatory adjustments, such as an increase in the minimum investment threshold, the PMS sector has demonstrated resilience with a formidable CAGR of 16%. As of July 2023, the PMS industry’s AUM reached ₹5.29 lakh crore, excluding EPFO/PF/Advisory data.

Future Projections: A Continued Growth Trajectory

Looking ahead, the PMS and AIF sector is poised to sustain its rapid expansion. Recent alterations in tax regulations regarding debt mutual funds and insurance are expected to play a pivotal role in driving the growth of alternative assets. With HNI investors increasingly recognizing the potential of alternative investments for diversification and wealth accumulation, the demand for these financial products is projected to surge.

The alternative investment industry’s upward trajectory bodes well for the Indian economy, attracting increased foreign investment, creating employment opportunities, and fostering the growth of domestic enterprises. As we stand on the brink of a new credit cycle, fueled by private sector investment, the PMS and AIF sector emerges as a key player, offering investors opportunities for growth and diversification in their wealth portfolios.

With Rurash Financials, explore the vast realm of alternative investment funds, meticulously curated across diverse asset classes. From Private Equity to Residential & Commercial Real Estate, and Hedge Funds, our offerings pave the way for high-yield investments.

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