How Alternative Investment Funds Perform Across Market Cycles: Data-Backed Analysis (2025)

AIFs are key to India’s private capital markets, especially for experienced, long-term investors. These investors can handle economic and market changes better than those using typical mutual funds. SEBI has shared Alternative Investment Funds data up to September 30, 2025, covering commitments, funds, investments, investor backgrounds & sector allocations, providing performance insights.

Snapshot: Alternative Investment Funds by the Numbers (Sept 30, 2025)

(Amounts in ₹ Crores)

Totals reflect cumulative net figures submitted quarterly to SEBI by registered AIFs.

Category Breakdown

• Category I AIFs (Infrastructure, SME, Social Impact, Special Situation, Venture Capital) are foundational and developmental in nature, investing across risky and early-stage ventures.
• Category II AIFs lead in capital and investments due to their private equity, credit, and multi-strategy approaches.
• Category III AIFs are the most adaptable, employing leverage, derivatives, and quick trades.

Where the Investments Comes From?

AIFs attract both domestic and foreign investment, showing strong investor faith in local and global markets.

Highlights from the data:

• Domestic investors account for the largest share of total funds raised across AIFs (₹4,74,127 crore).
• Foreign participation — including FPIs (Foreign Portfolio Investors), NRIs, and ‘Others’ — adds significant inflows (₹2,23,345 crore).
• Category II AIFs attract the most foreign capital (~₹2,13,289 crore), underscoring global confidence in diverse private capital strategies.

This blend across investor types helps AIFs perform across market cycles by anchoring capital from different pockets of the global investor base.

Investments Across Public and Private Markets

Rather than limiting allocation to listed equity or debt, AIFs show meaningful investment in unlisted assets:

• Total listed investments: ₹1,98,950 crore
• Total unlisted investments: ₹3,76,039 crore

Equity vs Debt — A Closer Look

AIFs don’t just sit in one bucket. SEBI breaks down investments into:

• Equity & Equity-Linked Securities: ₹3,94,224 crore
• Debt Instruments: ₹1,37,098 crore
• Units of Funds, REITs, InViTs, and Security Receipts: ₹42,272 crore

This diversified approach across asset types helps AIFs balance return and risk through booms and corrections.

Notably:

• Category II AIFs lead equity exposure with ₹1,98,240 crore
• Category III AIFs show unique allocations like REIT/InvIT units — a tactical move during market expansions

All told, Alternative Investment Funds demonstrate portfolio construction discipline that adapts to cycle conditions.

Sector Exposure — Beta to Growth Areas

SEBI’s top-10 sector investment list reflects where AIF managers are placing their bets:

1. Real Estate – ₹73,356 cr
2. Financial Services – ₹51,388 cr
3. IT/ITeS – ₹35,997 cr
4. NBFCs – ₹30,748 cr
5. Banks – ₹25,287 cr
6. Pharmaceuticals – ₹22,581 cr
7. Insurance – ₹15,062 cr
8. Health Care – ₹14,228 cr
9. Automobiles – ₹12,913 cr
10. Others – ₹3,30,379 cr**

Total: ₹6,11,939 cr across sectors

This sector spread shows real asset exposure (Real Estate) alongside financial and tech growth sectors, balancing defensive and offensive strategies depending on economic cycles.

AIF Growth Over Time – Seeing the Bigger Picture

Early Years: A Nascent Ecosystem (2016)

In 2016, the AIF framework was still finding its footing.

• Total commitments: ~₹65,000 crore
• Funds raised: ~₹29,000 crore
• Investments made: ~₹24,000 crore

Acceleration Phase: Liquidity-Driven Expansion (2020)

By 2020, the landscape looked dramatically different.

• Commitments: ₹4.41 lakh crore
• Funds raised: ₹2.13 lakh crore
• Investments made: ₹1.84 lakh crore

Stress Test: Growth Amid Volatility (December 2021)

Even as global markets turned volatile, AIF momentum held firm.

• Commitments: ₹6.09 lakh crore
• Funds raised: ₹2.97 lakh crore
• Investments made: ₹2.67 lakh crore

Steady Maturity: Disciplined Expansion (2022–2023)

Growth continued through 2022 and 2023, though at a more measured pace.

• Q4 2022
  • Commitments: ~₹7.51 lakh crore
  • Funds raised: ~₹3.49 lakh crore
• Q4 2023
  • Commitments: ~₹10.85 lakh crore
  • Funds raised: ~₹4.30 lakh crore

Scale Achieved: AIFs Go Mainstream (2025)

By March 2025, Alternative Investment Funds had clearly entered a new league.

• Commitments: ₹13+ lakh crore
• Funds raised: ₹5.32 lakh crore
• Investments made: ₹5.09 lakh crore

Year-Wise Snapshot (₹ crore)

What the Year-Wise Growth Tells Us About The Alternative Investment Funds

1. Consistent Growth

From 2016 to 2025, AIFs grew, increasing capital raised and investments through all market stages. This shows steady, structural growth, not a temporary surge.

2. Rising Investor Trust

Funds raised more than doubled from 2020 to 2023 & continued to grow in 2025, showing that institutions and wealthy individuals have growing confidence in alternative strategies.

3. Capital Deployment Changes

Initially, investments lagged behind commitments. By 2025, this gap decreased as more capital was invested in real assets and companies.

4. Adapting to Market Signals

Growth into 2025 indicates that AIFs quickly adapt to the market. They use private opportunities, invest in stable sectors, and draw foreign capital even during uncertain times.

Final Takeaway

The data tells a story of Alternative Investment Funds expansion alongside India’s private capital world. SEBI’s stats reveal a yearly trend: increased commitments, greater capital use, and a wider range of strategies. This growth comes from AIFs adapting to market changes.

Through economic booms, global downturns, rate spikes, and recoveries, AIFs keep drawing in capital and putting it to work. More unlisted investments, a mix of equity and debt, and involvement from local and foreign investors show a system built for the long haul, not quick gains. As the market grows, the smaller difference between commitments and investments shows increased confidence and better execution.

AIFs have changed from a small option to a key part of India’s long-term investing scene. Their ability to grow, diversify, and stay strong through market ups and downs makes them good for investors wanting more than typical assets. For those wanting to get into this area, platforms such as AltPort Funds assist in picking funds and aligning strategies in the complex AIF world.