“India’s AIF Market Poised for Exponential Growth, Projected to Hit USD 2 Trillion by 2027”
New Delhi, January 2: A transformative shift is taking place in India’s investment landscape, with the rise of Alternative Investment Funds (AIFs) expected to be a key player in this evolution. According to a recent report by Avendus, the rapid increase in high-net-worth individuals (HNIs) is propelling the growth of the alternative investment sector in India, which is anticipated to surpass USD 2,000 billion by 2027, up from the current USD 400 billion.
Traditionally, Indian investments have been concentrated on illiquid assets such as real estate and gold. However, the demand for higher returns amid the struggle of public equity markets to generate significant returns is driving a shift towards more diverse and alternative assets. The report indicates that the growing wealth of HNIs and ultra-high-net-worth individuals (UHNIs) will play a major role in this shift, with their wealth forecasted to reach USD 2,000 billion by 2027, which will in turn fuel an increased appetite for differentiated investment products like AIFs.
The domestic alternative assets under management (AUM) currently stands at around USD 400 billion, and the report highlights a significant opportunity for growth within this sector. As middle-income families experience rising wealth, the demand for alternative investments is expected to continue growing, further strengthening the underlying asset base.
A favorable regulatory environment, strong corporate governance, and the expanding population of affluent investors provide structural tailwinds that are positioning India’s AIF market for rapid expansion. The report emphasizes that AIFs are outpacing traditional asset management firms, showcasing the potential for higher profitability and a premium in valuations within this evolving market.
This transformation is also a result of the growing demand for professionally managed wealth solutions. As more investors allocate larger portions of their portfolios to alternative assets, a paradigm shift is occurring in investment strategies. Factors such as regulatory reforms, increasing HNI wealth directed toward AIFs, and the emergence of new asset classes, including private credit and real assets, further illustrate this trend.
With the number of HNIs and UHNIs projected to double over the next five years, the assets under management (AUM) in wealth management are also expected to grow exponentially. Despite HNIs currently allocating only 7-8% of their wealth to AIFs, the share of AIFs in their managed portfolios is expected to double over the next decade, reaching 15%.
Overall, the confluence of these factors sets the stage for a thriving future for India’s alternative investment sector. This growth trajectory mirrors global trends, positioning India to become a significant player in the global AIF market in the coming years.
