The landscape of alternative investments in India is undergoing a significant transformation driven by the rapid rise of high-net-worth individuals (HNIs), according to a report by Avendus. Traditionally, investments in the country have focused on illiquid, physical assets like real estate and gold. However, there is now a shift towards alternative assets as investors seek higher returns amid struggling public equity markets. The report predicts that HNI and UHNI wealth will reach $2,000 billion by 2027, driving a higher demand for differentiated products like Alternative Investment Funds (AIFs) which offer better opportunities for generating alpha.
The report estimates that domestic alternative assets under management (AUM) in India currently stand at around $400 billion, indicating a substantial growth opportunity. The favorable regulatory environment, high levels of corporate governance, and a growing population of affluent investors provide strong structural tailwinds for the alternative investments market in India. Alternatives are also outperforming traditional asset management companies, suggesting potential for improved profitability and valuation advantages in this evolving landscape.
As the demand for professionally managed wealth increases, investors are increasingly allocating significant portions of their portfolios to alternative investments, leading to a shift in investment strategies. Factors such as regulatory reforms, the growing allocation of HNI wealth to AIFs, and the emergence of new asset classes like private credit and real assets reflect this trend. The report highlights that as the number of HNIs and UHNIs is expected to double over the next five years, wealth management AUM is projected to experience exponential growth.
While currently only 7-8% of HNIs’ managed wealth is invested in AIFs, the report suggests that this share is expected to double to 15% over the next decade, driven by the increasing participation of HNIs in alternative investments. Overall, the convergence of these trends positions India’s alternatives sector for a prosperous future, drawing comparisons to successful global dynamics. With the increasing wealth and appetite for differentiated products among investors, the alternative investments market in India is poised for significant growth and evolution in the coming years.
