Consistent Alpha Over Public Markets
Equity-oriented AIFs have delivered approximately 8.69% alpha over the BSE Sensex TRI across seven benchmarking cycles, the report notes. This sustained outperformance underscores the ability of private market strategies — particularly venture and growth equity — to capture value beyond public market opportunities.
In an environment where public market valuations have been volatile, the data reinforces the case for AIFs as structured return-generating vehicles rather than tactical satellite allocations.
Domestic Capital Now Dominates
A significant structural shift has been the increasing dominance of domestic investors. Domestic capital now accounts for roughly 55% of commitments in Category I and II AIFs, marking a decisive move toward locally anchored private capital pools.
This transition reduces the ecosystem’s vulnerability to global liquidity cycles and foreign portfolio volatility. More importantly, it reflects growing comfort among Indian family offices, high-net-worth individuals and domestic institutions with private markets as a long-term allocation strategy.
The shift suggests that India’s private capital ecosystem is no longer primarily dependent on foreign limited partners but is increasingly supported by domestic wealth.
Secondaries Emerge as Liquidity Engine
Perhaps the most transformative development highlighted in the report is the rise of secondary markets. Secondary transactions now exceed ₹377 billion annually, signalling the emergence of structured liquidity pathways within India’s private market landscape.
This evolution challenges the traditional perception of AIFs as “lock-and-hope” vehicles where capital remains tied up until IPOs or strategic exits materialise.
Secondaries are enabling improved price discovery, capital recycling and duration management for long-term allocators. For investors, this introduces flexibility and portfolio rebalancing mechanisms that were previously limited in India’s private markets.
As secondary deal volumes rise, private capital structures are beginning to resemble more mature global markets, where liquidity options are embedded into portfolio construction.
From Alternative to Core Allocation
With sustained alpha generation, rising domestic participation and improving liquidity frameworks, AIFs are increasingly being viewed as a core portfolio allocation for sophisticated investors.
India’s broader macro trajectory — including formalisation of capital markets, regulatory oversight and expanding startup ecosystems — is further supporting this transition.
The report suggests that the industry is moving beyond headline fundraising numbers toward a phase where realised returns, governance standards and liquidity discipline will define long-term success.
The Road Ahead
As India’s economy continues to expand and wealth pools deepen, private capital is expected to play a larger role in funding innovation, infrastructure and growth-stage enterprises.
However, the next phase of evolution will depend not merely on raising capital but on efficient deployment, timely exits and disciplined portfolio management.
The crossing of ₹15 lakh crore in commitments marks a milestone. But the structural changes — consistent alpha, domestic capital dominance and the institutionalisation of secondaries — indicate that India’s AIF industry is transitioning from rapid expansion to sustainable maturity.
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