SBI Funds Management: Alternative Assets Drive Long-Term Growth

SBI Funds Management is poised for significant long-term growth, with analysts pointing to its expanding alternative asset business as a key driver. This strategic shift beyond its dominant mutual fund franchise promises diversified revenues and enhanced profitability.

Beyond Traditional Mutual Funds

Reports from Emkay Global and Equirus underscore the importance of SBI Funds Management’s presence in portfolio management services (PMS), alternative investment funds (AIFs), and specialized investment funds (SIFs). These platforms are seen as critical for long-term earnings, complementing the company’s established mutual fund operations.

Shifting Landscape for Affluent Investors

India’s asset management industry is witnessing a notable shift towards higher-yielding products, particularly equity-oriented offerings and alternative investments. Emkay notes that affluent investors are increasingly seeking customized strategies beyond standard mutual funds. This trend is set to boost revenue yields and improve the company’s overall earnings profile.

• Equirus highlights SBI Funds’ strong market positions:
• Largest PMS platform in India with a 39.7% market share.
• Holds ₹16.9 trillion in PMS and advisory assets.
• Major player in Specialized Investment Funds (SIFs) with a 28.2% market share.
• AIF assets under management grew at a CAGR of approximately 29% between FY24 and FY26.
• Non-mutual fund revenue increased at about 24% CAGR during the same period.

Diversification Mitigates Pressure, Drives Profitability

Unlike mutual funds, which serve retail investors with standardized products, PMS and AIFs cater to high-net-worth individuals, family offices, and institutional investors. This allows SBI Funds to engage across diverse segments of the wealth management industry with customized solutions.

This diversified business mix, especially the higher-margin PMS, AIFs, and SIFs, can effectively mitigate pricing pressure within the traditional mutual fund business. The strategy is expected to support overall revenue growth and profitability.

Future Outlook: Strong Revenue & EBITDA Growth

Emkay anticipates the shift towards equity and alternative investments will maintain healthy revenue yields and leverage operating growth. Equirus projects a revenue CAGR of about 14% and an EBITDA CAGR of nearly 15% between FY26 and FY29. These projections are driven by mutual fund expansion alongside faster-growing non-mutual fund businesses, with the company’s asset-light model sustaining strong profitability and return ratios.