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Alternative investment funds (AIFs) have transitioned from the margins of the financial system to become an important pillar of India's capital markets, connecting capital with sectors that require it most. Addressing the IVCA Conclave 2026 in Mumbai on Wednesday, Sebi Chairman Tuhin Kanta Pandey stated that the current geopolitical situation serves as a reminder that capital must do more than chase returns. "It must also build resilience," he noted, adding that for India, this creates a larger role for the AIF industry to finance sectors like renewables, logistics, and strategic manufacturing.
"India now has more than 1700 registered AIFs. As of December 2025, commitments stood at about Rs 15.7 trillion and investments at about Rs 6.45 trillion, a CAGR of close to 30% over the last five years. The AIF industry is not only attracting commitments, but it's also converting a growing share of these commitments into actual investment. This capital is being put to work in the economy. At the same time, the commitments standing at close to Rs 16 trillion, there remains substantial capacity for future deployment," Pandey said. "However, as of December 31, 2025, only about Rs 205 billion of AIF capital has gone to startups. If private capital stays too conservative, the core purpose of the AIF framework is lost. The industry can do much more to back innovation-led sectors and emerging businesses," the Chairman remarked. He also highlighted that "the potential of higher returns cannot be separated from the disclosure of higher risks" and insisted that risk profiling must become a real discipline rather than a "box-ticking exercise." Valuation integrity was identified as another critical area for the industry. The Chairman pointed out that AIFs often invest in early-stage and illiquid assets where credibility begins with valuation. "Weak or opaque valuations erode confidence," he said, warning that "valuation concerns can distort price discovery and weaken trust" as companies move toward public markets. He stressed that "fair valuation matters" and noted that "growth must be accompanied by standards that are non-negotiable." On the regulatory front, Sebi is exploring a "lodge and launch" model to facilitate faster and more efficient scheme launches. "For certain AIF schemes, reliance can be placed on due diligence certificates from merchant bankers," the Chairman explained. He also noted a sharp increase in accredited investors, rising from 649 in May 2025 to 2,181 as of February 2026. "The number of accredited investors has increased sharply... and these hold now close to 30% of the total AIF investments," he stated. "The AIF industry has a major role to play in India's growth story. But scale alone will not be enough. The real test will be whether growth is matched by stronger governance, deeper innovation capital, and greater trust. That's the direction in which SEBI will continue to engage with the industry. Our shared task is clear. To build an AIF ecosystem that is credible and aligned with India's long term development," the Chairman said. (ANI)
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