Despite rate hikes and inflationary fears, AIF funding remains strong

Mumbai The Alternative Investment Fund of India (AIF) continued its fundraising spree in the current financial year after hitting a record last year, as investors bet that high interest rates and sharp inflation will not dampen the country’s growth prospects.

For the quarter ended June 30, AIF raised price commitments 53,162 crore, exceeding the value of commitments 35,967 crore a year ago and 32,267 crore in the preceding March quarter, data from the Securities and Exchange Board of India showed.

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FY22 was the best year on record for AIFs, achieving commitments of 1.9 trillion from investors, more than double last year 81,228 crores. AIF had seen the commitments worth 87,840 crore in 2019-20.

AIFs are classified into three categories, Category I includes angel funds, social impact funds, small and medium-sized enterprise (SME) funds and infrastructure funds. Category 2 includes private equity, venture capital and debt funds, while Category 3 funds typically invest in the public market, such as hedge funds.

The largest share of commitments in the June quarter was received by Category 2 AIFs, which achieved 42,730 crore, followed by Category 3 and 1, which receive commitments of value 5,685 crore and 4,746 crores respectively.

To be sure, the figures are for commitments made by fund managers and not actual money that AIFs have staggered capital drawdown schemes and do not require committed capital.

According to industry experts, investor sentiment had plummeted in May and June, when the stock markets plunged due to the Russian invasion, with fundraising picking up again, with investors looking at the current valuation environment as an attractive one. seen as an opportunity.

“May and June saw a slight dip in the market in terms of investor sentiment, especially on the technical side, as people postponed their decisions for a month or two. However, since July, we have seen a revival of spirits with funds believing this is a good time to raise capital when valuations are more reasonable, and clients are also endorsing good fund managers who have dry powder Will happen. “Invest at a more reasonable valuation during the next 18-24 months than in the past,” said Nitin Singh, managing director and chief executive officer, Avendus Wealth Management.

Singh said there is a growing appetite for blind pool private equity and venture capital funds in the market and to a lesser extent in opportunities funds where the portfolios are already known, and the fund life is short.

Apart from equity funds, investors have also shown keen interest in fixed income AIFs.

“Significant money has also flown into fixed income funds in the last two to three months. Investors willing to look beyond traditional fixed income products are trying to make their portfolio interest rate immune. We’ve seen a lot of money flow into venture debt. Money is also flowing into commodity yields, income opportunities, infrastructure funds, stressed assets, performing credit,” Avendus K Singh said.

Industry experts believe that the demand for alternative products will continue to increase as investors seek access to high-growth private companies and diversify their portfolios.

“The amount of capital invested by private equity in India in the last 10 years is more than the money invested by FPIs. Private equity gives clients access to opportunities they might not otherwise have, and it also gives them virtually uncorrelated returns. Investors have also realized that they need two things: access and diversification. And it is driving the adoption of alternative asset classes. Anshu Kapoor, President and Head of Investment Management, Edelweiss Wealth, said, “We see this trend only to accelerate.

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