India’s AIF industry confronts its disclosure dilemma

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India’s alternative investment boom is colliding with a transparency reckoning. As Category I and II AIFs attract broader participation from HNIs and family offices, long-simmering tensions between investors, rating agencies and fund managers over disclosures and benchmarking are resurfacing.

That friction was on display at a recent closed-door meeting involving the Indian Venture and Alternate Capital Association (IVCA) and select family office founders and fund managers, where participants debated whether India’s venture and growth capital funds should continue operating with limited visibility on returns even as the investor base becomes more sophisticated.

Disclosure Debate Ends Without Clarity

While IVCA is yet to respond to Moneycontrol's queries on confirming more details on this meeting, sources reveal that a central point of contention herein was also whether Category I and II AIFs should disclose fund-level returns more systematically. A source familiar with the discussions said the case for withholding disclosures “ended without enough justification,” even as IVCA acknowledged investor concerns.

Sources stated that for now, IVCA showed apparent willingness to facilitate ad-hoc, fund-specific data requests. But stopped short of committing to a centralised or real-time disclosure framework.

By contrast, Category III AIFs — which typically deploy long-short or hedging strategies — already provide partial portfolio disclosures and marked-to-market reporting, leaving early-stage and growth funds relatively opaque outside their investor base.

Maturing Investors Are Asking Harder Questions 

This push for greater transparency is being driven by a shift in who is investing in alternatives, industry spokespeople continue to highlight. Munish Randev, CEO and Founder of Cervin Family Office, reflected on what the AIF landscape looks like today.

“With the market maturing, investors increasingly expect category-level data. Anecdotal performance is no longer sufficient,” Ramdev said.

He also flagged changes in how investors should be viewed under AIF norms.

“In today’s day and age, Rs 10 crore investors are HNIs rather than ultra-HNIs, and thus have legitimate expectations for information to make informed decisions. Disclosure helps calibrate capital allocation, understand portfolio risks, and compare with peers.”

Benchmarking Remains a Structural Gap

Another recurring concern was the lack of standardised benchmarking for Category I and II AIFs. Unlike mutual funds or portfolio management services, where performance is publicly tracked and comparable, AIF data remains fragmented and inconsistent.

One attendee noted that even CRISIL ratings or vintage-year internal rates of return can mislead if funds differ significantly in exit horizons, sector focus or capital deployment timelines.

‘Precincts’ Floated as a Middle Ground

As a possible compromise, participants discussed the idea of “precincts” — controlled-access environments where fund managers could share performance data with authorised parties such as rating agencies or select investors, without making disclosures fully public.

Supporters argue this approach could improve transparency while protecting proprietary strategies and competitive intelligence.

Fund Managers Warn of Unintended Consequences 

Some fund managers, however, have also persistently cautioned during such debates that public disclosure could unfairly penalise even strong managers during periods of temporary underperformance — a common feature in venture and growth capital investing.

A source privy to the meeting said there were voices who raised concerns on how publicising returns could expose "star managers" to undue scrutiny while their funds are still in early deployment or exit phases.

Concerns were also raised about confidentiality, competitive positioning and the risk of encouraging short-term performance chasing, particularly among smaller funds with limited investor bases.