Future Trends in AIFs: What To Expect In The Coming Years

AIFs have taken central stage as an investment tool for investors, thus introducing the investor to other investment options apart from equities and fixed income instruments. Importantly, this market has continued to expand as there is high demand for other types of investment instruments, and thus the AIF market will experience dramatic changes in the next couple of years. It is thus pertinent to discourse on the most obvious future trends defining the AIF landscape.

1. A new wave of Specialization in Investment Management

Hence, one can expect that in a gradually transforming AIF environment, there will be an increasing role of specialized approaches. In order to meet these demands, new distinctive offering themes like Impact investing, Technological investment and ESG (Environmental, Social, and Governance) are expected to grow. The AIFs focusing on special sectors such as renewable energy, artificial intelligence, or fintech specialized for HNWIs and institutional investors interested in specific sectors of development are expected to increase.

2. Rising Trend for Environment, Social, and Governance and Sustainable Investments

Globalization of sustainable development will affect the AIF market not as a tendency but as reality. People are also demanding investment products that combine Social Responsible Investment factors with business and financial results. With reference to future development, integrated and index funds would experience a further enhanced growth especially those that integrate ESG frameworks into the policies or those funds that have been established with particular emphasis on their sustainability-related sectors like clean energy and social impact.

3. Regulatory Developments and Greater Transparency

As the numbers of investors interested in AIFs increase, international regulatory authorities are beginning to ensure investors are guarded zeal. It was seen that the future trends in AIFs are expected to experience improvements in regulatory standards, resulting to increased accountability and structure in the industry. As a result of the higher reporting requirements and greater detail, investors will return to the sector and other entrants will also be attracted to this area.

4. The rise of Technology and Artificial Intelligence

The use of technology, AI and big data as means is likely to revolutionise the way these companies in the AIF industry function. Managers of the funds are expected to use AI to manage the risks, do analytics and come up with the right mix of stocks for investing. Big data driven funds, able to handle large volumes of data in order to determine market patterns and potential, are expected to spread as practical solutions, increasing fund’s effectiveness of decision making.

5. Expanding Investor Base

In the past, AIFs have attracted mainly institutional investors as well as ultra-high-net-worth individuals. But there is a clear movement to democratize this area. In the course of the succeeding years AIFs are likely to allow more number of investors especially the retail high net worth investors as reforms occur, financial advancements take place, and technology facilitates easy provision of the alternative investment funds.

6. Growth of Private Equity and Venture Capital AIFs

Private equity and venture capital (VC) AIFs have always remained popular investment products among investors who are in for higher risk adjustments. This is expected to increase in future, according to experts, with more firms setting aside more money for start-ups and other high-growth endeavors. Considering increasing start up’s ecosystem and the need of early stage enterprises in funding, PE and VC focused AIFs will likely constitute a higher proportion within the overall flow of AIFs.

7. Globalization of AIF Markets

The global market will have an impact on the increase in the use of AIFs because investors are in search of opportunities beyond their national borders. The inclination toward investment in international securities will further allow AIFs to offer investment in the emerging markets, which will have a higher growth rate. In turn, this will expand AIF geographical base and put forward new opportunities for fund managers on international markets.

8. Customization and Flexibility in AIF Offerings

Another of the factors influencing the future of the AIF industry is the continuously increasing customer expectations for tailored investment products. Customers need unique solutions that would correspond to their preferences as to risk and return, time horizon, and financial objectives. In our view, this should make fund managers to avail even more portfolio possibilities within AIFs that can be easily tailored to the needs of the fund managers and other clients.

9. Increased Role of Digital Platforms

Technology will help enhance possibilities of AIFs’ access and transparency through digital channels. As the popularity of technologies that define the fintech industry and investment platforms that support the acquisition of other types of investments increases, the AIF subscription process will become much more intuitive and convenient. This change will also also facilitate real time monitoring, evaluation and reporting giving subscribers and fund managers an excellent experience.

10. Greater Role of Family Offices

It was also noted that with the growing number of family offices which are used by those individuals and families that have multi-Billion Dollar wealth, their participation in AIFs is expected to rise. Since the family offices aim at managing and generating more wealth over generations, AIFs offer them a favorable means by which they can invest in PE, RE and other related markets that can offer long-term capital gains. This trend will drive development of even more complex new AIF products targeting family offices.

Conclusion

Several trends suggest that the future of AIFs will prompt interesting opportunities as well as advancements. With the increasing trends from specific investment models to technology as well as Artificial Intelligence’s application to AIFs, investors will be able to enhance their portfolio options. With improvements in the quality of the legal environment and with the continued diversification of the pool of potential investors, the AIF market is ready to experience significant further growth, becoming an essential link in the global investment chain.

We believe those who are in apposition to identify these trends early in the future will be in a better position to benefit from AIFs in the future years.

 SEBI Registration No:

PMS: INP 000006323

Investment Advisory: INA 000018337

BASL Enlistment No: 2036

Disclaimer

1.      Registration granted by SEBI, Membership of BASL, and Certification from the National Institute of Securities Markets in no way guarantee the performance of the intermediary or provide any assurance of returns to Investors

2.      The Securities Quoted are for illustration only and are not recommendatory

3.      Investments in the Securities Market are subject to market risk, please read the offer document carefully before investing.