As India’s wealth grows, HNIs look beyond equity, debt and gold to alternative investments

Shekhar Daga, Head–Private Capital at ICICI Prudential AMC, said the shift is being driven both by existing HNIs and family offices increasing their allocation to alternatives and by the growing number of investors entering the HNI segment. According to Daga, as the middle class.

Over the past four years, HNIs have increasingly allocated capital to alternative investments, he said. The alternatives universe broadly includes Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS).

What Happened

Through AIFs, investors can gain exposure to listed equities, real estate and private capital, including private equity and private credit. Private credit involves lending to companies through funds rather than banks, while private equity involves investing in unlisted companies.

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• Daga expects the alternatives industry to grow at around 25% annually over the next decade.

• He attributed the outlook partly to the stronger balance sheets of corporate India and improved borrower discipline following the implementation of the Insolvency and Bankruptcy Code in 2016.

Key Details

However, Daga cautioned that private capital is not a uniform asset class. Private credit itself spans performing credit, real estate credit, special-situation credit, distressed credit and venture debt, each carrying different risk-return characteristics.

• A diversified investor, for instance, could consider a mix of 40% listed equity, 40% listed debt and 20% private capital, depending on individual circumstances and risk tolerance.

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Why It Matters

Investors, therefore, need to understand the underlying strategy rather than relying solely on the broad “alternatives” label, he said. The private credit market has also attracted global investors, highlighting the growing institutional interest in the segment.

• He advised investors to prioritise principal protection, examine underwriting guardrails and margin of safety, assess the manager’s track record across business cycles and understand the collateral backing investments before committing capital.

• Unlike mutual funds, private investments generally lack a deep secondary market and cannot simply be redeemed.

What Reports Say

Coverage of the story so far points to:

• Continued reporting by Business Today as more details emerge