India’s Alternative Investment Market to Hit $2 Trillion by 2034

India’s alternative investment market is projected to grow more than five-fold, potentially surpassing USD 2 trillion by 2034, according to a recent report by EY and Julius Baer.

This significant expansion is anticipated due to increasing participation from high-net-worth individuals (HNIs) and a growing demand for higher-yielding, less-correlated assets within private markets.

Key Market Projections and Current Scale

• The current alternative investment assets in India are estimated at approximately USD 400 billion.
• Of this, USD 156 billion is held in SEBI-registered Alternative Investment Funds (AIFs).
• The remaining assets are sourced from offshore vehicles, family offices, and unlisted structures.

A primary driver for this projected growth is the evolving strategy of Indian family offices. These entities are actively transitioning from passive investment approaches to more hands-on roles within the market.

The Evolving Role of Family Offices

Family offices are increasingly engaging as limited partners in private equity and venture capital funds. They also participate through co-investments and direct investments, leveraging their sector-specific knowledge.

The report identifies family offices as a transformative force, utilizing their long-term investment horizons to support emerging businesses and new ventures. Their investment focus is diversifying across several key sectors.

• Artificial intelligence
• Climate technology and renewable energy
• Digital infrastructure, energy storage, semiconductors, and electronics manufacturing
• Cloud services and data centers
• Real estate remains a crucial investment sector.

Expanding Wealth Pool and Institutionalization

This market shift is underpinned by India’s expanding wealth pool, which includes over 19,000 ultra-high-net-worth individuals.

This number is anticipated to exceed 25,000 by 2031, further fueling the alternative investment landscape. The number of family offices has also seen substantial growth.

• Number of family offices in 2018: around 45.
• Projected number of family offices by 2024-25: nearly 300.

The report anticipates family offices will play an even more significant role in long-term capital formation. This will occur as their investment strategies become increasingly institutionalized, emphasizing stronger governance and data-led decision-making across various alternative investment avenues.