India’s alternative assets market is on the brink of a remarkable transformation, projected to grow five-fold to $2 trillion by 2034. This surge highlights the rising appeal of investment options beyond traditional avenues like stocks, bonds, and cash. With $400 billion currently in assets under management (AUM), this growth signals a significant shift in India’s investment landscape.
India’s alternative assets and their growth potential
The growth of alternative assets is driven by multiple factors. Firstly, investor sophistication is increasing as more Indians seek complex options to diversify their portfolios. Secondly, regulatory reforms introduced by the Securities and Exchange Board of India (SEBI) have enhanced investor confidence. Finally, alternative investments consistently outperform traditional ones, which makes them particularly appealing for those looking for higher returns.
High-net-worth individuals driving the surge
India’s growing population of high-net-worth individuals (HNIs) is a significant contributor to this trend. Although HNIs currently allocate only 7-8% of their wealth to alternative investments, this segment remains under-penetrated. Moreover, the total wealth of HNIs in India is expected to double to $2 trillion by 2027. This growth will undoubtedly create exciting opportunities for alternative asset managers to expand their offerings and attract more investors.
Global trends in alternative assets reflected in India
Globally, alternative investments have doubled their share of total assets under management, growing from 10% in 2005 to 20% in 2020. Similarly, India is experiencing a comparable transformation. Private equity and venture capital investments in the country rose to nearly 20% of Asia-Pacific’s total in 2023. As a result, India is becoming a global leader in the alternative investments space.
Future of India’s alternative assets market
Looking ahead, industry experts predict that alternative funds in India will undergo consolidation and listing. These funds are likely to command premium valuations due to their ability to generate superior returns. Furthermore, the shift from traditional, savings-focused investments to sophisticated alternatives signals a maturing investment market.
India’s alternative assets market is not only growing but also redefining how capital is deployed. Thanks to favourable regulations, cutting-edge technology, and an expanding base of sophisticated investors, this sector is poised to become a cornerstone of India’s economic growth.
