India’s alternative investment market is rapidly growing, outperforming public markets, and is projected to increase more than five-fold to $2 trillion in the next decade, according to Avendus’ December report “India Goes Alternatives”. The growth is driven by a rising number of High Net Worth Individuals (HNIs), increased interest in advanced investment strategies, and a favorable regulatory environment supported by SEBI.
Currently, the market is valued at $400 billion, which includes SEBI-registered Alternative Investment Funds (AIFs) worth $130 billion and other funds worth $270 billion. Key asset classes include private equity and venture capital ($250 billion), real assets ($125 billion), private credit ($25 billion), and niche segments like hedge funds, cryptocurrencies, art, and commodities.
In the next five years, India’s HNI and Ultra-HNI population is expected to double. Combined with the higher Internal Rate of Return (IRR) potential in Indian private markets compared to developed economies, this will further fuel alternative investments. Proven business models and faster deployment of funds are also contributing to the growth.
While traditional Asset Management Companies (AMCs) in India have struggled to generate alpha (market outperformance)—with only 35% of large-cap and 8% of mid-cap funds achieving alpha over five years—alternative investments have consistently outperformed. Last year, 51% of large-cap and 26% of mid-cap funds failed to deliver excess returns, while 75% of AIFs achieved positive alpha.
Globally, the alternatives industry is worth $20 trillion with annual revenues of $200 billion. Alternatives currently account for 48% of global HNI investments, expected to rise to 55% soon. Growth in Asia and the Middle East (8%) is outpacing North America (5%) and Europe (4%), with Asia-Pacific leading in the mid-affluent segment.
Around 78% of HNIs and UHNIs are increasingly contributing to demand for wealth management services, with 15% of their assets under management (AUM) already allocated to alternatives.
