Assets under management (AUM) of alternative investment funds (AIFs) continued to expand in the first quarter of FY27, reaching ₹7.59 lakh crore | Photo Credit: Natee127

Assets under management (AUM) of alternative investment funds (AIFs) continued to expand in the first quarter of FY27, reaching ₹7.59 lakh crore at the end of June 2026, up 28.3 per cent over the past year. Category II funds accounted for nearly 63 per cent of assets under management (AUM), while Category III funds recorded the fastest growth among the three categories of AIFs.

Domestic investors remained the largest source of funding, whereas foreign portfolio investors (FPIs) reduced their cumulative AIF holdings by 41.7 per cent. Investments in unlisted and equity-linked securities continued to dominate.

Category II funds dominate

AIF funds increased from ₹5.91 lakh crore towards the end of June 30th of FY26 to ₹7.59 lakh crore as of June 30, FY27. This follows YoY growth of 24.7 per cent on June 30, FY26 and 26.7 per cent in June 30, FY25.

Category II AIFs, which include private equity and debt funds, accounted for ₹4.78 lakh crore, or about 63 per cent of cumulative AUM, growing 26 per cent YoY. These funds typically invest in unlisted companies, private equity and debt instruments, and generally do not undertake leverage except for permitted operational requirements.

Category III AIFs, recorded the fastest growth at 35.2 per cent, with AUM reaching ₹2.17 lakh crore at the end of Q1 of FY27. Their share stood at about 28.6 per cent.

Category I AIFs, which include venture capital, infrastructure and other funds targeting specific sectors, grew 24.5 per cent YoY to ₹63,487 crore towards the end of first quarter of FY27, accounting for only 8.4 per cent of cumulative AUM.

Domestic investors swoop in

Gross cumulative funds raised from domestic investors reached ₹6.06 lakh crore as of June 30th in FY27, increasing 38.5 per cent YoY.

However, AUM of FPIs fell 41.7 per cent YoY to ₹1,247 crore.

According to Madan Sabnavis, chief economist, Bank of Baroda, “FPI behaviour is in sync with what they are doing in capital market. The quantum of investible resources is lower from the West and being spread across more markets, hurting AIFs.”

Chintan Hefa, Executive Director at Grant Thornton Bharat, added, “FPIs make up less than one per cent of foreign money in AIFs. Most foreign money comes from NRIs and ‘other foreign investors’ who together account for 95 per cent of AUM, remain positive on India’s private markets.”

Unlisted and equity-linked securities lead investments

AUM of AIFs in unlisted securities rose 21.8 per cent YoY to ₹4.28 lakh crore, while investments in listed securities grew by 28.1 per cent YoY to ₹2.35 lakh crore, as of June 30th, 2026. Similarly, equity and equity-linked instruments increased 30.2 per cent YoY to ₹4.73 lakh crore, while debt investments grew 18.1 per cent YoY to ₹1.56 lakh crore.

Real estate rebounds as pharmaceutical investments lose momentum

AUM of AIFs in real estate grew by 24 per cent YoY to ₹87,969 crore by end June FY27, rebounding from the 4.6 per cent contraction a year earlier. Financial services remained the fastest-growing major sector, expanding 50.4 per cent YoY as of June 30th FY27, to ₹69,083 crore.

In contrast, pharmaceutical investments grew just 2.7 per cent YoY to ₹23,323 crore as of June 30th FY27, sharply slowing from a 39.9 per cent YoY growth in FY26, signalling a moderation in fresh capital deployment into the sector.

Published on October 20, 2026