AIF Performance: Rational Equity, Prudent Equity almost double investors’ wealth in FY24; nearly 30 funds rose more than 50%

AIFs are regulated by the Securities and Exchange Board of India (SEBI) and can be formed as a trust, company, or Limited Liability Partnership (LLP). The minimum investment for an investor in an is Rs. 1 crore.

In the fiscal year 2024, within the Category III AIF, the Rational Equity Flagship Fund, Prudent Equity, and First Water Capital Funds experienced growth exceeding 90%, effectively almost doubling investors' wealth.

Category III AIFs are often focused on short-term trading, arbitrage opportunities, and other sophisticated investment strategies in listed or unlisted derivatives aimed at generating high returns.

Almost 30 out of 92 funds tracked by PMSBazaar.com witnessed a growth of over 50% in FY24 compared to the 28% return given by Nifty50 in the same period, and a nearly 40% rise seen in the S&P BSE 500 index.

Most of the funds that rose more than 50% also belong to the Category III category – Long only funds which include names like Samvitti Capital Alpha Fund (up over 80%), Ampersand Capital Growth Opportunities Fund Scheme (up over 70%), Aequitas Investment Equity Scheme rose 70% in FY24.

Long-only funds primarily invest in equity or equity-related instruments with a long-only approach, meaning they focus on buying securities with the expectation that their value will increase over time.

Alternative products, which are increasingly becoming an essential part of the investment portfolios of India’s wealthy, are driving the HNIs to PMSs and AIFs.

India's portfolio management services (PMS) and alternative investment funds (AIFs) are expected to grow at a combined CAGR of 26% to Rs 43.64 lakh crore by 2028, Pallavarajan R, Founder & Director, PMS Bazaar said in an industry report last year.

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Category II Performance

Category II – Debt Funds underperform rose 10-15% in FY24 – underperforming the Nifty50 index in the same period.

Various types of funds such as real estate funds, private equity funds (PE funds), funds for distressed assets, etc. are registered as Category II AIFs as defined by SEBI.

Vivriti Asset Management Alpha Debt Fund and Emerging Corporate Bond Fund delivered 12% and 13% return respectively in FY24. Vivriti Alpha Debt fund rose nearly 10% in FY24.

Northern Arc Investment Managers IFMR Fimpact Long Term Credit Fund and Income Builder Fund rose 10% and 12% respectively in the last financial year.

Under Category II – SME segment, Chanakya Opportunities Fund rose 56% in FY24.

Category III – Long Short Fund

Category III - Long Short funds deploy both long and short positions in equity or equity-related instruments, aiming to profit from both upward and downward movements in the market.

Most of the funds are market neutral and aim to generate returns regardless of overall market direction.

Whitespace Alpha Equity Plus Fund delivered more than 38% return, followed by Helios Capital’s India Long Short Fund that was up 37.9%, Avendus Capital’s Enhanced Return Fund rose nearly 37% and ICICI Prudential AMC’s Enhanced Dynamic Equity Fund delivered more than 36% return in the last 1 year.

Almost 9 out of 14 funds tracked by PMSBazaar underperformed Nifty50 in FY24.

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