Why AIFs are becoming popular for HNIs, family offices
Somdutta Singh, Founder and CEO of Assiduus Global, attributes this shift to the fact that it can bring them more wealth, better options, and smarter tax benefits. “Tax advantages are another major pull. Category II AIFs come with lower tax burdens, unlike mutual funds and stocks, where taxes can go up to 43%. Investors are also looking at GIFT City, India’s rising global finance hub, as a gateway to international markets. At the same time, Specialised Investment Funds (SIFs) are lowering entry barriers, making it easier for affluent investors to get in,” Singh said.
According to Vish Narain, managing partner at Pulsar Capital, there are four major reasons HNIs and family offices are increasingly turning to AIFs this year:
- Diversification and Risk Management: AIFs provide exposure to non-traditional asset classes such as private equity, venture capital, and hedge funds, helping reduce reliance on volatile stock markets
- Tailored Strategies: AIFs offer customised investment strategies aligned with specific goals, making them attractive to family offices seeking long-term wealth preservation
- Economic Growth and Wealth Creation: India’s robust economic growth and rising number of HNIs have fuelled demand for higher-yielding, personalized investment options like AIFs
- Sectoral Opportunities: Key sectors such as technology, AI, and biotech are drawing significant interest, aligning with global trends in alternative investments
“AIFs provide exposure to a variety of alternative asset classes, including derivatives, real estate, commodities, hedge funds, private equity, and venture capital,” said Ratish Gupta, director of Wealth Wisdom India Pvt. Ltd. “They are a useful tool for HNIs and family offices looking to diversify their portfolios beyond conventional assets like stocks and bonds.”
Yash Sedani, assistant vice president at 1 Finance, highlights the exclusivity. “AIFs offer exclusive access to start-ups, unlisted giants, and pre-IPO companies, a unique investment avenue unavailable in traditional collective investment schemes like MFs and PMS,” he said. Category II AIFs snag 77% of commitments, with Category III’s hedge fund plays also gaining traction.
A 27% CAGR over five years underscores the trend. For India’s wealthy, AIFs are fast becoming the go-to shield—and sword—in a shifting financial landscape.
First Published: Mar 12, 2025 7:35 PM IST
