India’s category III alternate investment fund commitments will triple to Rs 7.5 lakh crore by 2028, according to a new report by Indian Venture and Alternate Capital Association (IVCA) and Eleveight
Category III AIFs are high risk .high return funds that utilise various strategies such as leverage and derivatives. Examples of these category of funds include hedge funds and private investment in public equity funds (PIPE).
According to the report, Category III AIFs have grown faster than any other AIF category over the one, three, and five-year periods. This is primarily due to manager sophistication, expanding distribution, regulatory tailwinds, and the emergence of GIFT city.
“Category III AIFs reflect the growing sophistication of India’s capital markets—driven by sharper mandates, differentiated strategies, and rising global interest. From quant to multi-assetapproaches, the segment is evolving fast. At IVCA, we’re focused on enabling this momentum by addressing tax clarity, leverage norms, and strategy recognition—ensuring that innovation and investor confidence grow in tandem,” said Bhautik Ambani, CEO of AlphaGrep Investment Management & Co-Chair of CAT III Council at IVCA.
.thumbnailWrapper{
width:6.62rem !important;
}
.alsoReadTitleImage{
min-width: 81px !important;
min-height: 81px !important;
}
.alsoReadMainTitleText{
font-size: 14px !important;
line-height: 20px !important;
}
.alsoReadHeadText{
font-size: 24px !important;
line-height: 20px !important;
}
}
The report also noted that while the sector has benefited from regulatory innovation, 43% of fund managers remain neutral on recent changes and 29% see no positive impacts.
According to the survey, tax parity with mutual funds, smoother operational guidance, and more flexible execution norms are seen critical for further growth.
Additionally the report also points out that distribution education gaps, performance-sharing restrictions, and a shortage of long-short talent remain as headwinds for the sector, noting that addressing these could accelerate institutional adoption and strengthen investor confidence.
Nearly 60% of fund managers expect annualised growth rates of the sector between 15-30% with a further 21% expecting the sector to grow even faster.
