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Over the past few years, Alternative Investments are gaining popularity in India. Any investment that is not in a traditional asset class, such as stocks, bonds, or cash, is considered an alternative investment. These include real estate, hedge funds, and private equity. Alternative investments have the potential to expand quickly in the future, despite the fact that the trend is still in its early stages in India.
The country’s economic growth is one of the primary reasons for AIFs rising popularity in India. Investors are looking for new growth opportunities to diversify their portfolios and take advantage of the country’s economic growth. Alternate investments offer exposure to different asset classes and sectors that are not available in traditional investments.
In this blog, we’ll take you through the rise of alternative investments in India.
According to a report, the total amount of investments made through AIFs will increase at a 25% CAGR between 2022 and 2025, driven by wealth managers who offer AIF products as alternatives to high net worth individuals (HNIs), family offices, and insurance companies.
Why are AIFs gaining popularity?
One of the main reasons AIFs have become popular in India is the fact that alternative investments help investors to manage their risk and diversify their portfolios. AIFs provide some special investment opportunities that conventional investments do not, which can aid the investors to get higher returns.
The two alternative investment options that are most popular in India are private equity and venture capital. While venture capital funds invest in start-ups and early-stage businesses, private equity funds invest in privately held businesses that are not listed on the stock exchange. These two investment choices both have a sizable potential for high returns, but they also carry a higher level of risk.
Benefits of Alternative Investments
Another aspect is that AIFs are also popular among the Indian market due to their benefits. Let’s discuss the benefits of Alternative Investments in brief: –
Lower Volatility:
Including alternatives in a portfolio can help to reduce volatility, offer greater diversification, and boost returns because they frequently behave differently while comparing to conventional equity and bond investments.
Wider Diversification:
Alternatives can be a good way to diversify your portfolio because they have low correlation to conventional asset classes.
Returns:
Thanks to a wider range of investments and strategies, alternative investments can improve the risk and return profile of a portfolio.
Conclusion
To sum up, AIFs are becoming more and more popular in India because they give investors a special chance to diversify their portfolios and control their risk. Private equity and venture capital, the two most prominent types of AIFs, provide high returns but also involve a high degree of risk. As the nation’s economic growth prospects improve, alternate investment funds are anticipated to expand steadily.
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