Which AIF performed in October 2024- Analysis & Insight

 

The AIF industry has witnessed a 10-fold increase in assets under management (AUM) in just a decade with total commitments touching ₹11.3 lakh crore in March 2024. The number of funds launched has risen at 13% CAGR over five years to 1,306.  The strength of the AIF segment in India can be assessed from the fact that the average deal value in the AIF space has risen by a CAGR of 30%  between FY18 and FY23. The average deal size surged from $33 million in 2022 to $80 million in the first half of 2023.

India commands almost 20% of Asia Pacific funds dedicated to private equity.  It have become very important to analyse AIF bucket and to figure out which AIF is positioned how and the over all performance in depth. Further just by sharing a an excel report is also more cumbersome for investors and analyst to figure out how the various segments have performed in the last month. Hence we have come up with an detail analysis report for the same. Further as markets are turbulent its advisable to revisit your AIF investments made by you in last 2 to 4 years and figure out the next mode of action. In most cases it have been found that investors tend to live in notional profits and the point of view of realignment disappears.

The provided report outlines the performance metrics of various Alternative Investment Funds (AIFs) categorized as CAT III (Long-Only, Long-Short), CAT II (Debt and SME), and others. Each fund's data includes returns over multiple timeframes, their inception date, and key fund characteristics like open/closed-ended status.

 Performance Analysis of AIFs as on 31 October 2024 as per categories

1. CAT III - Long Only Funds

Performance Overview

• These funds primarily focus on long-term equity growth. Returns across funds varied significantly, reflecting diverse strategies and market exposure.

Top Performers

• A9 Finsight Pvt Ltd - FinAvenue Growth Fund: Delivered exceptional returns with a 153.47% 1-year performance, showing aggressive growth potential since its inception in July 2023.
• 360 ONE High Growth Companies Fund: Achieved a 47.62% 1-year return, maintaining strong 18.73% CAGR since inception (Nov-2018).
• Alchemy Capital - Emerging Leaders of Tomorrow - 2: Demonstrated an impressive 46.03% 1-year return.

Key Insights

• Funds with longer histories, like 360 ONE High Growth Companies Fund and Aditya Birla Sun Life India Equity Opportunities Fund, delivered consistent growth (44.03% 1-year return).
• Recent funds such as A9 Finsight are aggressively outperforming, likely leveraging newer market opportunities.

Underperformers

• Axis NewGen India Fund: Posted a negative 6.68% return for October 2024, indicating challenges in market alignment or sectoral issues.
• Several funds experienced near-term losses, with monthly returns ranging between -5% to -7%, highlighting short-term volatility.

 2. CAT III - Long Short Funds

Aggressive Strategies

• Designed for higher risk-adjusted returns by leveraging long and short positions.
• SBI Optimal Equity: Delivered stable growth with a 19.50% CAGR since inception (July 2022).
• ICICI Prudential Enhanced Dynamic Equity Fund: Posted a 34.21% 1-year return, ranking among the top performers.

Conservative Strategies

• Focused on stability and consistent performance:
• Alpha Alternatives Multi-Strategy Absolute Return Scheme: 12.55% CAGR over 5 years.
• Dolat Capital Absolute Return LLP: Maintained 19.68% 1-year returns, showcasing stability in risk management.

Notable Weakness

• Funds such as Vasisth Capital Relative Value Fund struggled with only a 9.70% 1-year return, underperforming against peers in the conservative category.

 

3. CAT II - Debt and SME Funds

Debt Fund Performance

• Vivriti Emerging Corporate Bond Fund: Strong performer with a 13.43% CAGR over 2 years and consistent returns since inception in December 2021.
• Northern Arc Money Market Alpha Fund: Delivered stable returns of 9.52% CAGR since inception (Jan-2019), appealing to risk-averse investors.

SME Fund Highlights

• Step Trade Chanakya Opportunities Fund: Dominated with an impressive 68% 1-year return, showing the high growth potential in niche SME investments.

 4. Emerging Trends and Noteworthy Insights

Consistency vs. Volatility

• Funds with a longer track record, like Alchemy Capital Leaders of Tomorrow, showcased resilience with stable 27.61% 5-year returns.
• High volatility funds such as Prudent Equity ACE Fund experienced sharp spikes, boasting 58.38% 1-year returns but with higher risk.

New Entrants

• Newer funds like Generational Capital Breakout Fund 1 showed aggressive growth (38.68% return since Mar-2024), signalling potential for early investors but higher risk exposure.

 Conclusion

The AIF market continues to deliver diverse investment opportunities. While aggressive funds excel in high-growth strategies, conservative options maintain steady performance. Investors should align their portfolios based on risk tolerance, historical consistency, and category-specific dynamics.

Top Performers Across Categories:

1. Aggressive growth strategies
• Aggressive growth strategies dominate in the Long-Only and SME segments, with funds delivering upwards of 40% annualized returns.
• Debt funds offered stability, catering to conservative investors.
2. Sectoral Trends:
• Market alignment played a crucial role, with sector-focused funds (e.g., financial services, growth equities) outperforming broad market funds.
3. Challenges:
• Funds like Axis NewGen India Fund and others with significant near-term losses highlight sectoral missteps or short-term headwinds.

Where we find new things ?

1. Volatility and Sector-Specific Risks:
• Funds like Prudent Equity ACE Fund exhibited sharp movements, with returns reaching 58.38% (1 year) but showing higher risk exposure.
2. New Funds on the Block:
• Younger funds like Generational Capital Breakout Trust (Breakout Fund 1) displayed high initial growth momentum (38.68% since Mar-2024).
3. Consistency Matters:
• Funds with a history like Alchemy Capital Leaders of Tomorrow showed stable long-term performance (27.61% over 5 years).

Prioritize funds with consistent multi-year returns and align with personal risk profiles. Evaluate newer funds like A9 Finsight or Generational Capital Trust for aggressive growth. Focus on portfolio diversification to reduce sectoral dependencies. Learn from outperformers (e.g., Vivriti Asset Management's debt strategies). Coming to future trends  Long-short conservative strategies might gain popularity given their risk-adjusted consistency. Emerging SME-focused funds offer untapped growth opportunities. However, investor diligence is essential, given the varying strategies, risks, and returns across funds.