AIFs likely to become preferred investment vehicle for family offices: Study

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Family offices in India are expected to increase their allocation towards Alternative Investment Funds (AIFs) in the coming years, which will also align them with the global trends wherein such offices have a large exposure towards alternatives.

According to a latest study by Sundaram Alternatives, despite the growing appetite for startups and alternative investments among ultra-rich family offices, nearly 50 percent still allocate as much as 20 percent of their portfolios to mutual funds -- making it the largest allocation across asset classes.

Further, only around 10 percent of the family offices surveyed as part of the study – the sample included 30 family offices -- said they invest 59 percent in AIFs and 53 percent said they invest in startups.

More importantly, however, the study found that in the next three years, family offices want to increase their allocation to AIFs by five percent and take the allocation to 18 percent of total portfolio.

This is the highest increase as compared to Portfolio Management Services (PMS), mutual funds, direct equity, and gold, which will increase by one percent in the next three years.

“This aligns with a global trend, where family offices allocate more than 50 percent of their assets to alternatives,” said Vikas Sachdeva, Managing Director, Sundaram Alternatives.

Family offices, however, are not going big on startups as their allocation is expected to remain at current levels going ahead. Allocation towards real estate and fixed income is expected to fall by three percent and eight percent respectively.

“Among AIFs, family offices are more interested towards Category II AIFs which are inclined towards private debt. Category II is followed by Category III AIFs,” Sachdeva told Moneycontrol.

Within AIFs, family offices are expected to increase allocation towards venture debt, venture capital, and long short funds by two percent over the next two years, as per the study.

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