Individual investor participation increases in AIFs; women account for one-third of investor base

CAMS, in its first-ever report on Alternative Funds, titled Alternative Funds: Insights on Investors and Intermediation, has come up with insights based on over 180 Alternative Fund House services. The institution highlights that over the past five years, the alternatives industry has grown exponentially at 38 per cent CAGR and is pegged to grow 27-29 per cent CAGR by FY2027.

Notable Trends

The prime drivers of growth in the segment, as listed by CAMS, are the superior return profile, structuring options, regulatory framework, liquidity, and declining attractiveness of real estate.

Women investors make up over a third of the investor base; 32 per cent of the base are women investors.

Besides, younger investors are foraying into alternatives. Doubling the share of investors <35 years of age is a decisive pointer to an emerging segment with potential that alternatives can target.

The report also highlighted that households with Rs 30 lakh investable assets have grown at a 15 per cent CAGR in 2010–2020. Note that for qualifying as investors in the instrument, Rs 30 lakh is the minimum amount set for India, Brazil, and China.

The participation of institutional investors in Alternatives continued to dominate,contributing over 56% share of inflows but individuals share is also increasing.

While top 10 locations contribute 80% plus of the collections, the emerging potential in non-metro locations is promising. Top 10 locations – Mumbai, NCR, Bangalore, Kolkata, Chennai, Pune, Hyderabad, Ahmedabad, Kanchipuram, Thane, contributing the most to the investment option, in respective order.

Participation by direct investors in AIFs has grown steadily over the last 5 years. The amount collected from direct investors grew 2.5x to contribute 42% of the total funds raised in FY23 compared to 27% in FY19.

The funds raised through distributors grew 1.3 times during this same period bringing down the share from 73% in FY19 to 58% in FY23.