Alternative Investment sector set to cross Rs 100 lakh cr mark by 2030

The Indian alternative investment sector, which includes Portfolio Management Services (PMS) and Alternative Investment Funds (AIF), is poised to surpass the Rs 100 lakh crore threshold by 2030 as it embarks on a new phase of growth, as per PMS Bazaar estimates.

The PMS and AIF sectors have experienced remarkable growth, achieving a compound annual growth rate (CAGR) of approximately 33% over the past decade, from FY14 to FY25. As of FY25, with data available up to Q1FY25, the total assets of PMS and AIFs have reached Rs 18.87 lakh crore. This total includes Rs 7.08 lakh crore in PMS (excluding EPFO contributions and advisory services) and Rs 1.79 lakh crore in AIFs, with Category-II AIFs accounting for the majority of the assets.

If this growth trajectory continues, the overall industry is projected to surpass Rs 100 lakh crore by 2030, marking an over 5-fold increase in just 6 years. The potential for growth in the longer term depends on sustained growth, economic conditions, and investor interest, according to PMS Bazaar estimates

India’s rapid economic growth, fuelled by government initiatives, domestic market expansion, and infrastructure investments, has created an environment ripe for alternative investments. As India aspires to have $35 trillion economy size by 2047 and enters its next phase of rapid development, PMS and AIF are increasingly becoming the vehicle of choice for HNIs and UHNIs, seeking more personalized and higher-yielding investment options.

Recent regulatory changes aimed to enhance investors’ protection are expected to further drive HNIs towards alternative investments. Performance of alternates also have been decent, with long-term alpha creation. For instance, within the PMS Bazaar universe, of the 62 PMS strategies that have completed a decade, about 70% have delivered strong long-term performance, outperforming benchmark indices.

In addition, SEBI has been strengthening regulations for both PMS and AIF, ensuring that these products become more efficient and investor-friendly, thereby enhancing their appeal in the market.

Commenting on this, R. Pallavarajan, Founder & Director, PMS Bazaar, says, “The growth of PMS and AIF reflects a fundamental shift in how India’s affluent investors approach their portfolios. The demand for tailored, high-return alternatives is expected to grow substantially in the coming years. These investment vehicles are pivotal in propelling India’s economic growth, social progress, and governance, aligning with the government’s growth vision as well. Key factors driving this growth include investors’ increasing need diversification, and the expanding affluent population.”

Rise of Alternative Investments

The rise of PMS and AIF in India is driven by factors such as increasing affluence, rising financial literacy, regulatory support, a thriving growth ecosystem, and a demand for diversification to mitigate risks, especially volatile markets, creating an ideal environment for their growth among HNIs and UHNIs. These trends position India as a global financial hub with lucrative investment opportunities.

Naveen Kulkarni, CIO, EVP, Axis Securities, says, “The traditional equities industry, dominated by mutual funds, is experiencing a significant shift towards alternative investment structures such PMS and AIF. These alternatives are gaining traction due to their potential for better risk-adjusted returns, especially in the post-COVID landscape. Projections suggest that it could see a 3-4x increase in the coming years. This trend underscores that alternatives are not just the future—they are rapidly becoming the present.”

The Future of Investment

As India continues its strong economic trajectory, the demand for alternative investments, such as PMS and AIF, is expected to rise significantly. These investment vehicles are increasingly seen as essential tools for HNIs and UHNIs looking to achieve superior returns, greater diversification, and personalized portfolio management.

With buoyant economic conditions, robust government policies, and an evolving financial ecosystem, the future of PMS and AIF in India appears exceptionally promising. As India moves towards becoming a developed nation by 2047, the growth prospects for these alternative investment products will play a pivotal role in shaping the country’s financial landscape.