"Unlike traditional providers of debt capital, AIFs provide better and entity-specific structuring solutions to the issuers."

What specific factors have contributed to the robust growth of India's Alternative Investment Fund (AIF) industry despite the challenges posed by the pandemic?

Alternate Investor Funds have helped various pools of capital such as sovereign wealth funds, HNIs, pension funds, insurance companies, etc. to diversify their capital allocation, which brings down the concentration risk on their portfolio. Furthermore, AIFs have been able to get better returns which has attracted investors in times of lower interest regimes like during the pandemic. Also, for some, AIFs were their first choice of investment as it was able to meet their risk and reward matrix.

Could you elaborate on the trends and shifts within the AIF industry in terms of investor preferences and the types of investment opportunities that have gained traction?

With the expectation of interest rates at peak, we are seeing investor appetite for locking up longer-term trades at higher rates currently. We also expect interest rates in the country to soften from the next financial year onwards. Unlike 6-8 months before, we have investors looking for both medium and longer tenured investment.

How has the establishment of the IFSC at GIFT City enhanced the competitiveness of India's alternative investment fund industry on a global scale, and what unique opportunities does it offer to debt fund managers?

IFSC as a regulator has enabled AIFs to access global pools of capital at par with international financial markets and regulations. Further, significant tax advantage (GST, Capital gains, STT, MAT, corporate tax, etc.) has been provided to the funds based out of GIFT to bring them at par with global funds. Also, the ISFC has provided more flexibility to AIFs in structuring the funds, such as leverage, etc., which improves the overall return to the investors, thereby attracting a larger pool of global capital through GIFT city’s route.

How do you see the regulatory landscape evolving for AIFs in India, and what potential implications might this have on the industry's growth and development?

Our regulator, SEBI (Securities and Exchange Board of India) has put in steps for consolidation and simplification of rules, e.g., coming out with master circulars. This helps in ease of business for AIFs in terms of business planning and for an investor in making investment decisions. Furthermore, SEBI is continuing with its focus on strengthening investor protection. Newer market participants such as fintechs and bond platforms have been asked to improve disclosure norms and change corporate structures to safeguard retail investors.

Could you provide insights into the unique advantages or strategies that AIFs offer to mid-market enterprises in comparison to traditional financing methods?

Unlike traditional providers of debt capital, e.g., banks & NBFCs, AIFs provide better and entity-specific structuring solutions to the issuers matching their cash flows, and business requirements. AIFs have seen participation from a newer and diversified pool of investors, who have never ventured below AAA/ AA/govt papers while dealing with debt securities. This has deepened the debt capital market for mid-market issuers.

Disclaimer:

The views provided here are personal and do not necessarily reflect the views of Vivriti. This article is intended for general information only and does not constitute any legal or other advice or suggestion. This article does not constitute an offer or an invitation to make an offer for any investment.