RICH ALLURE

ALTERNATIVE INVESTMENT FUNDS SCORE OVER REAL ESTATE BECAUSE THEY OFFER POTENTIAL FOR HIGHER RETURNS, ARE MORE LIQUID, AND FAR SIMPLER TO PASS ON TO HEIRS

- ANAGH PAL

IN 2017, MUMBAI-BASED businessman Rakesh Shah bought a house in Alibaug, a coastal town in the Konkan region of Maharashtra just a ferry ride away from India's financial capital.

Shah wanted it to be a place for his family to spend fun weekends and earn him a tidy profit over time.

Things didn't quite pan out the way he imagined they would.

"It just wasn't adding up financially," Shah, 47, says. The house was rarely used, rental demand was weak, and its upkeep was expensive, he says.

In 2023, he sold the property and chose to invest the proceeds in an alternative investment fund (AIF), typically a pooled investment vehicle that invests in nontraditional assets like private equity and hedge funds. They have a minimum investment of ₹1 crore.

Sure, the decision may seem contrarian for a wealthy investor, to whom it may make better sense to invest in a holiday home or a second house. However, Shah is so far pleased with the switch.

"It's managed by professionals, there's no maintenance hassle, and the returns feel more stable," Shah explains.

Some high net-worth individuals (HNIs) like him are being drawn to AIFs by the promise of diversification, simplicity and higher risk-adjusted returns. Securities and Exchange Board of India (Sebi) data show that domestic institutional investors are seeing record inflows; AIF commitments reached ₹13.49 lakh crore by March 2025.

The traditional attraction of a second home as a symbol of legacy and status, it would appear, is being challenged by the compelling math of AIFs. Let us take a look at some reasons behind this.

NUMBERS

For India's affluent, second homes have long represented more than investments—they embody generational wealth, social status and tangible security.