Top Alternative Investment Funds In India 2025: Best Diversification Options
The Indian investment landscape has changed significantly in recent years, marked by a surge in investor participation and the growing popularity of diverse investment assets.
Alongside traditional options, modern avenues such as top alternative investment funds in India have become increasingly prominent in investor portfolios. Alternative Investment Funds (AIFs) represent one of these innovative investment routes, gaining significant traction among Indian investors in the 21st century.
Introduction
On 21st May 2012, the Securities Exchange Board of India (SEBI) enforced the Securities and Exchange Board of India (Alternative Investment Funds) Regulations 2012. The objective was to regulate the private pool of funds.
This section delves into the meaning and growth of these investment avenues.
What Are Alternative Investment Funds?
An Alternative Investment Fund refers to a privately pooled investment medium that aggregates the funds from domestic and international investors and invests them in compliance with the stated investment policy. In India, it can be incorporated as a body corporate, limited liability partnership, trust, or company.
There are three participants in an AIF investment. Each of them is discussed below.
| Setlor | Establishes the trust which operates as an AIF. |
| Trustee | Manages the pool of funds collected privately. |
| Contributor | Investors who commit capital to the AIF. |
An AIF invests in alternative assets such as commodities, real estate, private equity and hedge funds in India and abroad.
For instance, the table below shows key insights on an AIF called 360 One Asset1.
| Global presence | Spread across countries like India, Singapore, Mauritius, UAE, Canada. It invests in both onshore and offshore assets2. |
| Portfolio | Mutual funds, alternative investment funds, Portfolio Management Services. |
| Target investors | High Networth Individuals (HNIs), Ultra High Networth Individuals (UHNIs), Foreign Institutional Investors (FIIs) |
Growth Of AIFs In India
The AIF growth in India is evident through consistent data and facts available. As of December 2024, Alternative Investment Funds in India experienced a 5% quarter-on-quarter growth. The total commitments reached INR 13,49,051 crore as of 31 March 20253.
There are three different kinds of AIFs in India, namely Category I, II and III. As of 31 March 2025, the AIF investments made in each category is represented in the graph below.
Various factors have contributed to AIF growth in India. A few of the most important factors are covered here.
- Economic Growth: The economic progress of the country in terms of its GDP, per-capita income, etc. are significant contributors to this rising trend.
- Increase in HNIs: Alternative investment platforms are predominantly targeted towards HNIs, UHNIs and FIIs. 2024 reports state that India has the sixth-highest UHNI population in the world4. Moreover, its ranking in Asia in the UHNI population category stands at number three. The rise in HNI and UHNI populations directly impacts the growth of AIFs.
- Regulatory support: Regulators like SEBI and RBI have extended significant support to the AIF ecosystem, aiding the top alternative investment funds in India further. For instance, reports dated 19 May 2025 state the RBI’s proposals to relax investment norms in regulated AIFs5.
Rising trends of AIFs and their contributing factors impact the performance of the top Alternative Investment Funds in India to a significant extent.
Top Alternative Investment Funds In India (2025)
Multiple Alternative Investment Funds (AIFs) exist today. However, like in the case of any investment medium, certain AIFs perform better than the rest. This section takes a closer look at the top Alternative Investment Funds in India as of 2025.
Overview of Leading AIFs This Year
Despite fluctuating market conditions, the majority of Alternative Investment Funds (AIFs) in India have produced positive returns in 2025, demonstrating their strong performance. 110 out of 123 monitored AIF strategies had gains in April 20256.
The best AIFs in India yielded single-month yields that range from 5 to 9%. Due to robust economic growth and widespread sectoral gains, long-only Category III AIFs fared better than long-short strategies.
The table below lists the top five industries with the most cumulative net investments.
| Sector | Cumulative Net Investment (INR Crores) |
| Real Estate | 69,896 |
| IT/ITes | 34,553 |
| Financial Services | 27,223 |
| NBFCs | 25,564 |
| Banks | 23,793 |
Key Performance Metrics: Returns, Risk, and Track Record
The top-performing alternative funds in India are the flag bearers of the growth trends discussed above. However, selecting the top Alternative Investment Funds in India requires analysis of certain key parameters. These parameters are discussed below.
1. Returns: The most obvious indicator of an AIF's value creation for investors over a certain period is its return. Investors can gauge the returns generated over months or years. The table below shows the top-performing AIFs in April 2025 and the monthly returns produced by them7.
| Funds | Returns |
| Finideas Growth Fund Scheme-1 | 7.36% |
| CCV Emerging Opportunities Fund-I | 8.61% |
| Aarth AIF Growth Fund | 7.86% |
2. Risk: The cost of return is a risk. Investors have to bear the risk burden to derive returns. Nonetheless, the risk needs to align with the investor's risk profile. Investors can compare the returns delivered by AIFs with market indices like Nifty 50, BSE 500 over a specific period to gauge the degree of risk. Moreover, the disclosures made by the AIF about parameters like portfolio holdings, performance updates, etc., can provide important insights.
3. Track record: Track record is the term used to describe the past performance of AIF funds and their managers over time. Parameters like experience, knowledge, and prior success are evaluated by rating agencies and investors as indicators of potential performance.
Featured Funds
The table below lists the top Alternative Investment funds in India as of 21 May 2025, based on one-year returns.
| Name | One-Year Return (%) | Return since inception (%) |
| A9 Finsight Pvt. Ltd.- Finavenue Growth Fund | 24.87 | 78.38 |
| Knightstone Capital Management LLP- Matterhorn India Fund | 24.62 | 21.72 |
| Negen Capital Services Pvt Ltd- Negen Undisclosed Value Fund | 24.09 | 37.53 |
| 360 One Asset Management- High Growth Companies Fund | 19.74 | 17.55 |
| 360 One Asset Management- High Conviction Fund Series 1 | 17.75 | 15.39 |
How To Compare AIFs ?
There are various Alternative Investment Funds in India. For instance, the Real Estate AIFs in India have got significant traction because real estate tops the list of sectorwise cumulative net investments.
Therefore, choosing the best AIFs in India requires optimal comparison of different parameters. Some of these parameters are discussed below.
Investors must identify the category of funds they wish to invest in. Comparison of key metrics like AIF returns within a particular category is important to ensure optimum portfolio diversification.
Standard performance metrics like annualised returns, internal rate of return, etc., can help gauge the return of the top-performing alternative funds. Some key metrics are discussed in the table below.
| Distribution to Paid in Capital (DPI) | Calculates the amount of money that investors have received back compared to their initial investment. |
| Residual Value to Paid in Capital (RVPI) | Shows how much of the outstanding investments have not yet been realised. |
| Total Value to Paid in Capital (TVPI) | Shows the overall value generated (realised + unrealised) compared to invested capital by combining the DPI and RVPI. |
For instance, if DPI is 10 and RVPI is 12, then TVPI will be 10 + 12 = 22.
1. Benchmark: Comparing the performance of AIFs with various benchmarks and indices typical to specific categories can help optimum portfolio diversification. Crisil AIF benchmarks and Nifty AIF benchmarks provide data across categories.
For instance, in FY2024, the benchmark TVPI of Category I stood at 1.19.
2. Qualitative analysis: Analysing the past performance of fund managers, including their experience, educational background, etc, can also aid decision making.
3. Expenses: Fund managers charge management fees and other fees for investing in an AIF. These parameters add to the cost of investment and are thus crucial for optimum investing.
Categories Of Alternative Investments In India
Optimum comparison of AIFs requires an understanding of three AIF categories. Therefore, to ease investor understanding of the high-return investment funds in India, listed below are the different AIF categories.
1. Category I AIFs:
These funds invest in start-ups, early-stage ventures, SMEs, infrastructure, and social ventures that are considered socially or economically beneficial. Examples include venture capital funds, SME funds, and infrastructure funds.
2. Category II AIFs:
This category covers funds like private equity and debt funds that do not fall under Category I or III. They typically avoid leverage, except for daily operations, and focus on investments in unlisted companies or debt instruments.
3. Category III AIFs:
These funds use complex trading strategies, including leverage and derivatives, to generate short-term returns. Hedge funds and certain PIPE (Private Investment in Public Equity) funds are key examples in this category
Choosing The Right Alternative Investment Funds
The success of an investment depends on choosing the right investment medium. However, the process of selecting the right medium is based not only on the characteristics of the assets in question but also on individual investor characteristics.
1. Assessing Risk Appetite and Investment Goals
Investors must consider their risk profile before investing. If the risk of an asset is beyond the risk-bearing capacity, the investor may face capital depreciation of their asset portfolio. The risk metrics of an investment might be in tandem with the risk-bearing capacity. Moreover, fiscal goals are also a key influencer. For instance, a risk-averse investor might find equity funds undesirable.
2. Evaluating Fund Manager Track Record
The top Alternative Investment Funds in India employ highly experienced and skilled fund managers to manage the AIF portfolio. Optimum evaluation of an AIF involves understanding the team of fund managers and their track records. In this case, the word track record refers to the performance of funds managed by these experts.
Understanding Fee Structures and Minimum Investment
SEBI AIF regulations stipulate that individual investors must invest at least INR 1 crore8. Moreover, there are various fees associated with the AIF investment, such as management fees, performance fees and so on. It is similar to the fees involved in mutual funds. These fees act as a cost to investment and must be considered for optimum investment.
Regulatory Compliance and Transparency
AIF due diligence incorporates an array of regulatory compliance aimed at promoting transparency. Since AIFs are targeted predominantly towards HNIs, UHNIs and FIIs, regulatory compliance is necessary to avoid illegal transactions like money laundering. For instance, the number of investors of an AIF cannot be more than 1000, other than angel investors. Ensuring strict adherence to these frameworks must be ensured by any AIF9.
Conclusion
Alternative Investment Funds were brought under the regulatory jurisdiction of SEBI in 2012. These are privately pooled funds targeted towards HNIs, UHNIs and FIIs. Presently, the investment landscape is witnessing a significant increase in AIF popularity. This trend is influenced by several factors, such as increased HNI population and economic prosperity.
However, investment in the top Alternative Investment Funds in India requires a thorough analysis of their risk, return, benchmark comparisons and much more. Moreover, regulatory compliance is also necessary for successful investing.
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FAQs on Top AIFs In India
1. Is AIF better than mutual funds?
AIFs and mutual funds meet distinct investor demands. AIFs provide accessibility to unique assets and possibly better returns, but they need more capital, carry more risk, and have less liquidity.
Mutual funds are more accessible, regulated, and liquid. So they are suited for most investors seeking higher stability and flexibility.
2. What are the benefits of AIF?
AIFs have substantial advantages, including access to a variety of asset classes such as private equity, real estate, and hedge funds, which are sometimes inaccessible through standard investment vehicles.
They provide portfolio diversity, the possibility for better returns, and exposure to innovative methods, making them appealing to investors seeking growth and risk management.
3. Is AIF tax-free?
All income earned by Category I and II AIFs will be subject to 12.5% capital gains tax. The same revenue would be subject to 30% tax for residents and up to 39% tax for non-residents if it were classified as business income.
Therefore, both category I and II AIFs have acquired the pass-through status, which means that they are taxable in the hands of the investor. However, Category III AIFs have not acquired pass-through status and the taxes are borne by the fund. This implies that the dividend earned by the investor is tax-free.
References:
1. Securities and Exchange Board Of India, accessed from: https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=16
2. 360 One, accessed from: https://www.360.one/asset-management/disclosures/
3. Securities and Exchange Board Of India, accessed from: https://www.sebi.gov.in/statistics/1392982252002.html
4. The Hindu, accessed from: https://www.thehindu.com/real-estate/the-rise-of-indian-hnis-and-uhnis-in-2024/article69022791.ece
5. The Economics Times, accessed from: https://economictimes.indiatimes.com/news/economy/policy/rbi-proposes-relaxing-rules-for-investments-in-aifs/articleshow/121269381.cms?from=mdr
6. PMSBazaar, accessed from: https://pmsbazaar.com/Blogs/110-of-123-AIFs-Deliver-Gains-in-April--Top-Performers-Log-5%E2%80%939percentage-Returns
7. Money Control, accessed from: https://www.moneycontrol.com/news/business/markets/top-10-aif-performance-for-the-month-of-april-2025-13027174.html
8. CNBCTV18, accessed from: https://www.cnbctv18.com/alternative-investment-fund/aif-investment-how-much-corpus-do-you-really-need-19564077.htm
9. Securities and Exchange Board Of India, accessed from: https://www.sebi.gov.in/sebi_data/attachdocs/1471519155273.pdf
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