India’s Alternative Assets Market Set to Reach $2 Trillion by 2034

December 19, 2024

The Alternative Assets market in India is currently valued at $400 billion and is projected to expand to $2 trillion over the next decade. The growth is attributed to sophisticated investors seeking better portfolio diversification and higher returns. Regulatory changes have also played a role.

Global Context of Alternative Assets

Globally, the Alternative Assets market is worth approximately $20 trillion and constitutes about 20% of total assets under management. Private equity and real assets have traditionally dominated this market. However, investors are increasingly exploring private credit, complex hedging strategies, natural resources, and cryptocurrencies.

Trends Among High Net Worth Individuals

In India, high-net-worth individuals (HNIs) are actively seeking diversified investment products. Currently, alternatives account for 7-8% of their total assets under management. This indicates substantial room for growth in this segment. Many investors are turning to alternatives as a means to mitigate risk and enhance potential returns.

Emerging Interest from Family Offices

Family offices and ultra-wealthy individuals are pursuing more complex investment options, suggests that middle-income families are also becoming interested in asset classes such as real estate investment trusts and infrastructure investment trusts. This trend reflects a broader shift in investment strategies across various income levels.

Projections for Wealth Growth

The number of HNIs and ultra-HNIs in India is expected to double in the next five years. Their collective wealth is projected to reach $2 trillion by 2027. This growth will likely increase demand for differentiated products like Alternative Investment Funds (AIFs), which could represent 15% of their total wealth.

A stronger regulatory framework for AIFs has been established, promoting investor confidence. A standardized approach to portfolio valuation has also contributed to the growth of these investment products. This regulatory environment is crucial for the sustainable expansion of the Alternative Assets market in India.

GKToday Notes:
HNIs: High Net Worth Individuals are affluent investors with assets. They seek diversified investment products. Their growth indicates a shift towards alternative assets in India.
AIFs: Alternative Investment Funds are pooled investment vehicles. They cater to sophisticated investors. AIFs are expected to represent 15% of HNIs’ wealth by 2027.

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