Category III Alternate Investment Funds (AIFs) will have an increasingly significant role to play in liberating the Indian High Net Worth Investor (HNWI) from the inherent volatility and lack of diversification by investing in the domestic equity markets. Given the minimum investment in these funds is set at Rs 1 crore, the option is effectively closed for the mass-market retail segment.
Alternative asset managers such as hedge funds, private equity and venture capital firms do not seek to outperform a benchmark such as a stock index. They seek an absolute return irrespective of whether the market is up or down. Often AIFs are used to protect and preserve investor capital and as such they play a key role in diversifying an investor’s exposure in the wider market.