Why Alternative Investment Funds Could Outpace All Other Asset Classes

FOR 2024, the global gross domestic product (GDP) was about $114 trillion.

- By Ritesh Vohra

Total assets under management (AUM) of the asset management industry worldwide was around $128 trillion (112 per cent of GDP). Of this, private markets (comprising PE, VC, real assets, hedge funds, private credit, et al), constituted $24 trillion, translating to about 21 per cent of GDP. On the other hand, India's GDP for 2024 was $4 trillion. Total AUM of the asset management industry (mutual Funds, PMS, alternatives) was $1.4 trillion (35 per cent of GDP). Of this, private markets (comprising commitments to all alternative investment funds), constituted $0.15 trillion, less than 4 per cent of GDP.

No doubt, private markets are more than just AIFs, but that's beside the point. What this column is attempting to establish is that on the long runway ahead for our asset management industry, AIFs could grow meaningfully faster than the overall pie.

Astonishing Growth of AIFs

Past data bears this out well. Since the time Sebi came out with the AIF regulations in FY13, total commitments to AIFs have grown nearly 940 times at a compound annual growth rate (CAGR) of 77 per cent.

However, let's look at more recent data. Comparing FY20 numbers with FY25, we see that the total commitments to AIFs have grown from Rs 3.5 trillion to Rs 13.5 trillion, a fantastic 3.6 times in five years with a CAGR of 30 per cent. This compares with 22 per cent growth in AUMs for MFs and 16 per cent for PMS over the same period, albeit on a much bigger base.