Alternative investments have become increasingly popular in recent years as investors seek new ways to diversify their portfolios and generate returns. In India, where traditional investment options such as Fixed Deposits, Post office savings schemes, Insurance savings schemes, Gold, Stocks, Mutual Funds are dominant, alternative investments have gained momentum and offer several options for investors to explore.
Alternative investments refer to non-traditional investment options that are not typically available in public markets. They may include asset classes such as real estate, private equity, hedge funds, commodities, art, and more. These investments offer an opportunity for investors to diversify their portfolios and potentially generate higher returns.
One popular alternative investment option in India is Lease Financing. This involves leasing equipment or machinery to businesses for a specified period, with the option to purchase the asset at the end of the lease term. Lease financing is particularly attractive for small and medium-sized enterprises (SMEs) as it provides access to assets without the need for a large upfront investment. According to a report by the Reserve Bank of India, the leasing industry in India has grown at a compounded annual growth rate (CAGR) of 11% between 2010-11 and 2019-20.
Another alternative investment option is Invoice Discounting, which involves the sale of unpaid invoices to a third party at a discount in exchange for immediate cash. This provides businesses with quick access to cash flow and reduces the risk of bad debts. The invoice discounting market in India is estimated to be worth around INR 10,000 crores and is expected to grow at a CAGR of 12-15% over the next few years.
Peer-to-peer (P2P) Lending
Peer-to-peer (P2P) Lending is another popular alternative investment option in India, which involves lending money to individuals or businesses through an online platform. This allows borrowers to access financing without the need for traditional banks and offers investors an opportunity to earn high returns. The P2P lending industry in India is estimated to be worth around INR 2,000 crores and is expected to grow at a CAGR of 20-25% over the next few years.
Fractional Real Estate
Fractional Real Estate is a relatively new alternative investment option in India, which allows investors to own a fraction of a property or real estate project. This provides investors with access to real estate investments without the need for a large upfront investment and reduces the risk associated with owning a single property. The fractional real estate market in India is estimated to be worth around INR 10,000 crores and is expected to grow at a CAGR of 30-35% over the next few years.
Corporate Bonds are another popular alternative investment option in India, which offer fixed returns and are issued by companies, banks, and the NBCF’s. Bond investments provide a steady source of income and are relatively low risk compared to other alternative investments. The bond market in India is estimated to be worth around INR 54 lakh crores and is expected to grow at a CAGR of 12-15% over the next few years.
Art is also an emerging alternative investment option in India, which involves investing in paintings, sculptures, and other forms of art. This provides investors with the opportunity to invest in unique and valuable assets, which may appreciate in value over time. The art market in India is estimated to be worth around INR 1,200 crores and is expected to grow at a CAGR of 15-20% over the next few years.
Alternative Investment Funds (AIFs)
Alternative Investment Funds (AIFs) are a relatively new investment vehicle in India that allows investors to pool their funds and invest in various asset classes such as private equity, real estate, and infrastructure. AIFs are regulated by the Securities and Exchange Board of India (SEBI) and provide investors with access to investments that are not available in public markets. The AIF market in India has seen significant growth over the past few years, with the total AUM (Assets Under Management) of AIFs in India reaching INR 2.7 lakh crore as of March 2021.
Portfolio Management Services (PMS)
Portfolio Management Services (PMS) are another popular alternative investment option in India, which involve the management of funds on behalf of investors. PMS providers offer customized investment solutions to investors and invest in a range of asset classes such as equity, debt, and real estate. PMS providers are regulated by SEBI and offer investors a higher degree of control over their investments. The PMS market in India has grown significantly over the past few years, with the total AUM of PMS providers in India reaching INR 21.8 lakh crore as of March 2021.
Unlisted Shares are another alternative investment option in India that offer investors the potential for attractive returns. Unlisted shares refer to shares of companies that are not listed on stock exchanges. These shares are generally illiquid and are traded through off-market transactions. Investing in unlisted shares can be risky, but they can also provide higher returns compared to listed shares. The market for unlisted shares in India has grown significantly over the past few years, with several online platforms now offering investors access to unlisted shares of high-growth companies.
In conclusion, alternative investments offer investors an opportunity to diversify their portfolios and potentially generate higher returns. With several alternative investment options available in India, investors can explore different asset classes and find investments that suit their risk appetite and investment goals. As with any investment, it is important to conduct thorough research and seek professional advice before investing. Some of the alternative investment options are suitable primarily for High Networth Individuals (HNI’s) but due to availability of innovative online platforms many of these options are now available for retail investors as well.
We at Meta Investment offer many of these alternative investment opportunities to our customers and help them choose right investment based on their risk profile and financial goals.