The alternative investment industry in the country, including Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs), has experienced significant growth in the past five years, surpassing traditional mutual funds, according to the latest data from PMS Bazaar.
From June FY19 to June FY24, the alternative investment industry has achieved a Compound Annual Growth Rate (CAGR) of 26%, with assets under management (AUM) reaching Rs 13.74 lakh crore as of June FY24. This growth rate is more than double that of the mutual fund industry, which recorded a CAGR of 13% with an AUM of Rs 46.63 lakh crore as of August 2023.
PMS Bazaar attributed the surge in the alternative investment industry to factors such as rising income levels, increased accessibility to alternative investments, catering to a wide range of High-Net-Worth Individuals (HNIs) and Ultra-High-Net-Worth Individuals (UHNIs). The availability of comprehensive information about alternate investments and the appeal of diversification and higher returns also contributed to the rapid expansion of the industry.
PMS Bazaar is a platform that provides information, analytics, and comparisons for investors and intermediaries interested in PMS and AIF. It aims to help investors create wealth using these wealth-building mediums.
PMS and AIF structures are gaining significant traction, and the assets base of these products is projected to grow to Rs 43.64 lakh crore by 2028.
According to Pallavarajan R, Founder & Director of PMS Bazaar, India’s growing affluence is leading HNIs to alternative investments like PMS and AIF, which offer lucrative opportunities, customized solutions, and transparent structures. He expects the PMS & AIF industry to reach Rs 43.64 lakh crore by 2028 if the same pace of investments continues.
Alternative investments, especially AIFs, have become essential components of India’s wealthy investors’ portfolios. AIFs have achieved a CAGR of 36% over the last five years. Category II AIFs, including venture capital, private equity, real estate funds, and private credit, have experienced robust growth due to increased interest from HNIs and UHNIs.
Despite regulatory changes, such as an increase in the minimum investment requirement, the PMS industry has exhibited resilience and demonstrated a strong CAGR of 16%. As of July 2023, the PMS industry’s AUM stood at Rs 5.29 lakh crore (excluding EPFO/PF/Advisory figures).
Sunil Rohokale, MD and CEO of ASK Group, stated that the alternate investment opportunity in India is currently untapped but has the potential to exceed USD 300 billion. He added that investors prefer reputed, well-established, and institutionalized players with a good track record to be a part of their growth journey.
Looking ahead, PMS Bazaar expects the PMS and AIF industry to continue its rapid growth in the coming years. The recent changes in tax rules for debt mutual funds and insurance are also expected to contribute to the growth of the alternative assets industry. As HNI investors recognize the potential of alternate investments in diversification and wealth creation, the demand for such products is anticipated to increase.
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