India's Rich Imitate Hedge Fund Strategies

Growth in domestic inflows into PE- and private credit-led Category II AIFs slumped to a five-quarter low

- Abhinaba Saha

India's wealthy are increasingly shifting towards public market-linked investment strategies despite higher risks as opportunities for outsized gains in private markets fade, Mint's analysis shows.

Growth in domestic capital inflows into private equity- and private credit-led Category II alternative investment funds slumped to a five-quarter low of 4% in the April-June quarter, the analysis shows. In contrast, Category III funds continued to draw steady inflows, outpacing both Category I and II funds for a fifth straight quarter.

Alternative investment funds collect funds from other investors to invest in companies or projects. Category I AIFs include venture capital and infrastructure funds, while private equity and debt funds fall under Category II AIFs. Category III AIFs such as hedge funds have a higher risk appetite with aggressive investment strategies such as using algorithms for automated high-frequency stock trading.