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With a growing appetite for risk-based investments and prolonged market volatility, alternative investment funds are gaining momentum in India. These asset management strategies provide investors with opportunities to diversify their portfolios and mitigate risk at the same time.
In this article, we take a look at why alternative investment funds are on the rise in India, who they are suited for, and which are the best examples of these investment options.
What Are Alternative Investment Funds?
An alternative investment fund is neither an equity nor a debt fund, but a hybrid of both. These funds are often created in response to changing market conditions, such as political uncertainty, economic expansion or a change in interest rates. Alternative investments are made up of assets that are not stocks or bonds. Examples of alternative investments include real estate, commodities or derivatives.
Why Are Alternative Investment Funds Rising in India?
The demand for alternative investment funds in India is growing because of a few key reasons:
- A Long-Term View – Alternative investment funds are meant to be held for long-term growth. With a volatile equity market, investors may want to take a long-term view to protect their capital while also earning good returns.
- Protect Capital – Investors may want to switch to investments that can protect their capital, and generate wealth over long term.
- Increase Returns – With interest rates expected to rise in the U.S., investors may be looking for growth outside the U.S. equity markets, where dividends are not taxed.
- Diversify Portfolio – Investors may want to diversify their portfolio to spread the risk across other investment classes.
- Market Sentiment – Investors may also be looking to benefit from market sentiment as certain alternative investment funds could be rising in value.
Types of Alternative Investment Funds
Alternative Commodity Funds – These funds invest in volatile commodities such as gold, silver and crude oil. They may also invest in agricultural commodities such as corn and soybeans.
Alternative Credit Funds – These funds are invested in leveraged loans, collateralized by corporate bonds or government securities.
Alternative Fixed Income Funds – These funds invest in high-yield, high-risk debt instruments such as junk bonds and high-yield corporate bonds.
Alternative Growth Funds – These funds invest in companies with high growth potential, high market share and high profit margins.
Alternative Hedge Funds – These funds are unregulated, but they are an asset class that includes a range of investment strategies.
Conclusion
As the Indian equity market continues to be volatile, the demand for alternative investment funds has increased. Investors are looking for new and innovative ways to boost their returns, protect their capital and diversify their portfolios. These investment options can provide investors with a steady income stream and a chance to earn higher returns. Investors are always looking to make the most of their investments and it is no surprise that alternative investment funds are rising in India and expected to grow further given the current market conditions.
