Assets managed by the alternative investments industry, comprising portfolio management schemes (PMS) and alternative investment funds (AIFs), are estimated to cross Rs 100 lakh crore by 2030, as Indian family offices expand their focus beyond traditional assets.
The number of family offices has increased from 45 in 2018 to 300 in 2024, according to a study by EY and Julius Baer. This has been driven by the need to manage and preserve wealth, tailor investments based on risk appetite, streamline financial management and safeguard personal and financial information, the report notes.
Many of the new-age family offices cater to the needs of first-generation entrepreneurs and investors who have a higher tolerance for risk and in-depth understanding of some of the emerging sectors. They are prepared to allocate capital to innovative business models. The majority of the family offices in the study have allocated over one-fourth of their portfolios to this asset class, with more than half investing over 50%.
Recent changes in the norms, which enable Category II AIFs to invest in listed debt securities with a rating of A or below and allow the sale of securities by AIFs to be treated as capital gains rather than business income, have enhanced the attractiveness of these vehicles.
Regulatory oversight by the Securities and Exchange Board of India (SEBI) and a clear framework for AIFs are directing savings into private credit. Larger family offices globally, and in India too have 15- 25% of their portfolios in alternative funds, of which 25-30% goes into private credit solutions.