Introduction
Have you ever wondered how high-net-worth investors in India tap into private equity, venture capital, or real estate in ways that ordinary investors can’t? Alternative Investment Funds (AIFs) provide that bridge. They open doors to professional fund management, high-return opportunities, and portfolio diversification. Let’s explore how they work.
Why AIFs Matter: Key Data & Returns
By March 2025, investments in Indian AIFs reached ₹5.38 lakh crore, marking a 32% increase from the previous year.
- Private Equity AIFs delivered a pooled IRR of 21.5% between FY13 and FY24.
- Early-stage AIFs performed even better, generating a 26.9% return over the same period.
- Category III AIFs (long-only and hedge/long-short strategies) grew in popularity. There are now 257 registered Category III AIFs with commitments exceeding ₹1,28,000 crore as of December 2023.
These numbers show that AIFs are not just a trend; they consistently deliver strong outcomes, often outperforming public markets over time.
How AIFs Unlock Access to Private Equity, Venture Capital & Real Estate
1. Private Equity & Venture Capital via AIFs
AIFs enable HNIs and family offices to invest in unlisted companies, ranging from startups to growth-stage firms, without having to source deals themselves. Additionally, venture capital funds under AIFs focus on high-growth sectors such as technology, healthcare technology, and climate technology.
Professional fund managers handle deal sourcing, performance monitoring, and exits. As a result, investors can enjoy private equity and venture capital returns without being deeply involved.
2. Real Estate Investment through AIFs
Real estate AIFs pool capital to invest in commercial properties, infrastructure, logistics parks, and other assets. This enables investors to participate in large-scale projects that would be impossible to undertake individually.
These funds manage regulatory, construction, and maintenance risks. Furthermore, they provide professional asset allocation, helping diversify portfolios with real estate exposure.
Key Benefits of AIF Investment
| Benefits | What does it give you |
| Portfolio Diversification with AIFs | Lowers dependence on public equity and debt. Exposure to private equity, venture capital, and real estate helps reduce correlation with stock market swings. |
| High Return Opportunities | AIFs in India have delivered strong returns. Some early-stage funds have generated IRRs of over 20% in the long term. |
| Tax Efficiency | AIFs follow pass-through taxation. Long-term capital gains on real estate or unlisted shares are taxed in the hands of investors as per current income tax rules. Specific structures may offer more efficient timing and exemptions compared to direct ownership. |
| Professional Fund Management | Access to skilled fund managers who source deals, manage risks, and plan exits. You benefit from their expertise without having to do all the heavy lifting. |
| Wealth creation & Private Market Access | AIFs open doors to startup funding, scaling businesses, and real estate projects. These private markets can offer strong value-creation potential. |
Risks & Considerations
- Lower Liquidity: Most AIFs require a 5–10 year commitment.
- Volatile Returns: Early-stage investments are prone to significant fluctuations.
- High Minimum Investment: Many AIFs require ₹1 crore or more.
- Regulatory & Sector Risks: Policy changes or sector challenges may impact returns.
However, professional management, due diligence, and transparency can often effectively mitigate these risks.
Performance Examples
- Early-stage AIFs between 2013 and 2024 achieved 26.9% IRR.
- Private equity AIFs pooled 21.5% IRR in the same period.
- Category II AIFs raised ₹9.13 trillion in FY24, channelling private capital into high-impact ventures.
Why Choose Equentis Investech?
At Equentis Investech, we make alternative investments clear, accessible, and goal-aligned.
- We offer curated AIF options focused on private equity, venture capital, and real estate.
- Transparency is key: deal details, fees, and risks are clearly communicated.
- Experienced managers monitor performance and guide exits.
For clients seeking portfolio diversification, tax-efficient wealth creation, and long-term growth, we tailor solutions to meet individual goals.
Conclusion
Alternative Investment Funds provide access to private equity, venture capital, and real estate in ways conventional investments cannot. With IRRs above 20% in many cases, professional management, and portfolio diversification, AIFs offer compelling opportunities for HNIs and institutional investors.
If you want to explore AIF investment benefits and partner with experts who understand both opportunities and risks, Equentis Investech is ready to guide you. Together, we can create a portfolio that strikes a balance between growth, resilience, and long-term value.
