#4 Things to Keep in Mind While Committing Your Wealth to an Alternative Investment Fund Manager Do you truly understand the asset class?

By Vanita D'souza

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.


As wealth continues to grow in the country, investors have started to look at new shores to support their growth trajectory. This is one of the main reasons why a fairly new asset class - alternative investment funds (AIFs) have gained significant traction in the country.

The asset class, which was launched in 2012, presently has over 500 funds registered within the segment. According to SEBI, as of June 2018, AIFs have got commitments worth INR 179585 crores and have raised nearly INR 97611.73 crores. On the other side, these funds have invested close to INR 74892.

Considering the trend will continue and AIFs will continue to get more commitments, here are few things investors should keep in mind while parking money in these funds:

Be Aware

AIFs have been around for merely six-seven years, so before committing to a fund, understand the asset and whether it marries your goals.

Umang Papneja, Senior Managing Partner and Chief Investment Officer, IIFL Wealth says, "The advice is similar for any investment – be clear on your investment goal and investment horizon. If the product suits your time horizon and investment needs, only then evaluate and invest in these products."

The Fees

While evaluating an asset class, investors often ignore the fee structure looking at the lovely returns portrayed to them by the fund managers.

But Raghvendra Nath, Managing Director of Ladderup warns them about this ignorant behaviour and recommends investors to critically evaluate the free structure.

"Understand if the fees are justified for the kind of returns that you are going to get after all expenses and taxes. Most of the times investors do not understand the fees completely and later are surprised by the idea," he pointed out.


AIFs invest in the non-listed space. They generally park money in SMEs, real estate, Startups, etc and hence, your liquidity is likely to suffer.

Giri Krishnaswamy, CIO – The Acord Fund, Centrum Alternatives shares, "It is critical to follow a disciplined asset allocation with risk, age & liquidity determining the level of allocation to this asset class. It is also important to remember that this allocation, especially in the unlisted space, carries the risk to illiquidity and an ability to hold on to these assets for a longer duration."

Fund Manager

Lastly, check and cross-check the credibility of the fund managers and their ideas as there is almost no exit window in AIFs for investors.

Giving an example of private equity space, Nath says in the earlier fad 6-8 years back, people invested in a lot of PE funds, lured by the promise of high returns. Most of these funds failed to meet their projections and investors were left with no room to act. And in the AIFs space, this is likely to be repeated.

"So, even if you are dissatisfied with the performance, once you have committed, you have to stay the course and endure the pain. For this reason alone, one should think many times before committing oneself to invest in any AIF. Having said, there are some brilliant products, ideas and fund managers in this category. One has to be discernible to separate the wheat from the chaff and only invest in ideas that tick all the boxes," he advised.

Vanita D'souza

Former Senior Correspondent, Entrepreneur India

I am a Mumbai-based journalist and have worked with media companies like The Dollar Business Magazine, Business Standard, etc.While on the other side, I am an avid reader who is a travel freak and has accepted foodism as my religion.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Related Topics

Business News

Former Pediatrics Professor Donates $1 Billion, Makes Albert Einstein College of Medicine Tuition-Free

Dr. Ruth Gottesman's husband left her $1 billion in Berkshire Hathaway stock with the following instructions: "Do whatever you think is right with it."

Business News

'Next Tesla' Electric Car Startups Hit Speed Bump: 'Investors Want To See Demand'

Electric vehicle companies large and small, from Ford to Tesla to Rivian, are dealing with cooler-than-expected demand for EVs.

Growing a Business

The Top 2 Mistakes Founders Make That Hinder the Growth of Their Companies

Here are two of the biggest ways founders sabotage their own success — and how to fix it.

Starting a Business

Long-Lost Sisters Who Built the Largest Black-Owned Wine Company in the U.S. Reveal How to Break Into a Notoriously Tough Industry

Andréa and Robin McBride followed their shared love of wine into business — but it hasn't always been easy.


Your Secrets Won't Stay Hidden For Long — Follow These 6 Ways to Help Protect Your Reputation

On the web, internal crises can turn into a five-alarm fire in a hurry. Knowing how to respond can go a long way toward limiting the damage and protecting your brand from long-term harm.

Business News

'Inexcusable': Ryanair May Have to Cut Summer Schedule, Increase Fares Up to 10% Due to Issues With Boeing Aircraft

Boeing was originally slated to deliver 57 aircraft to the airline by the end of April.