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India’s AIF industry doubles in size in less than five years

India’s alternative investment fund (AIF) industry doubled from $36 billion at the end of 2016 to $72 billion by September 2021 – an increase of more than 100% in assets under management (AUM) for Securities and Exchange Board of India (SEBI) registered funds alone, according to the inaugural Benchmark Report for India Alternative Investment Funds (AIFs).

The report was published today by Preqin, a specialist in alternative assets data, tools, and insights, in partnership with the Indian Venture and Alternate Capital Association (IVCA), and under eligibility from SEBI.

The benchmarks in the report comprise of 296 schemes across AIF Category I, II, and III, for performance data as of 31 March 2021. These benchmarks provide a top-level overview on a range of indicators such as net internal rate of return (IRR), net multiple, called capital, distributions to paid-in-capital (DPI), and residual value to paid-in-capital (RVPI) on the dominant strategies that are employed by domestic managers.

The benchmark includes AIFs registered with SEBI. Category I, II, and closed-end PIPE funds are eligible for benchmarking if the scheme has completed one year from its first close, up until March 2021. Angel funds and schemes without transactions are excluded. Category III and open-ended PIPE funds are eligible for benchmarking if they were incepted prior to March 2021.

Preqin’s Benchmark Report found that Category I funds outperformed the MSCI India Total Return Index by 19%, backed by strong venture capital returns, with Category I funds of vintage 2016 being the best performing at 24.6% net IRR. Additionally, India-focused venture capital funds offer the highest median net IRR compared to the other asset classes at 18% but have the highest standard deviation of net IRR at 34%.

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