Key Takeaways
- • Indian insurers invest less than 2% of their assets in alternative investments, versus around 20% for insurers in overseas markets, according to Aashwin Dugal, CEO of Nippon Life India AIF Management Ltd.
- • Dugal sees significant room for domestic institutional investors to increase allocations to funds financing infrastructure, businesses and other long-term projects.
- • Institutional comfort with the asset class is growing as allocators gain experience across investment cycles, with pension funds gaining confidence from regulatory changes permitting private credit investments.
- • Dugal warned that larger inflows into alternatives will require fund managers to strengthen risk management, particularly credit underwriting for private credit.
Summary
Indian insurance companies invest less than 2% of their assets in alternative investments, compared with around 20% in overseas markets, according to Aashwin Dugal, CEO of Nippon Life India AIF Management Ltd. Speaking to ANI on the sidelines of the 4th CII Alternative Investment Fund Summit in Mumbai, Dugal said the gap highlights significant scope for domestic institutional investors to increase participation in funds that finance infrastructure, businesses and other long-term projects.
Dugal said India's alternative investment fund (AIF) industry remains relatively small compared with developed markets, where insurers, pension funds and sovereign wealth funds play a major role in financing investment. He said institutional participation is gradually rising as investors grow more comfortable with the asset class. "As allocators, like insurance companies, become more comfortable and complete two or three cycles of money coming back, I think that will give them more confidence," he said.
Dugal also pointed to pension funds, noting that regulatory changes allowing investments in private credit are helping build confidence in the sector. He said Category II AIFs in particular are already providing long-term capital to businesses and productive assets in India, and that alternative funds could help bridge funding gaps for smaller companies seeking to expand and eventually list publicly.
He cautioned that growing institutional inflows will require fund managers to strengthen risk management. On private credit, Dugal stressed the importance of assessing borrowers' financial strength, funding needs and repayment capacity. "Credit underwriting will be very critical," he said. He added that India's alternative investment industry has matured considerably and is likely to play a more meaningful role in financing businesses over the next 10 to 15 years.
Dugal said India's alternative investment fund (AIF) industry remains relatively small compared with developed markets, where insurers, pension funds and sovereign wealth funds play a major role in financing investment. He said institutional participation is gradually rising as investors grow more comfortable with the asset class. "As allocators, like insurance companies, become more comfortable and complete two or three cycles of money coming back, I think that will give them more confidence," he said.
Dugal also pointed to pension funds, noting that regulatory changes allowing investments in private credit are helping build confidence in the sector. He said Category II AIFs in particular are already providing long-term capital to businesses and productive assets in India, and that alternative funds could help bridge funding gaps for smaller companies seeking to expand and eventually list publicly.
He cautioned that growing institutional inflows will require fund managers to strengthen risk management. On private credit, Dugal stressed the importance of assessing borrowers' financial strength, funding needs and repayment capacity. "Credit underwriting will be very critical," he said. He added that India's alternative investment industry has matured considerably and is likely to play a more meaningful role in financing businesses over the next 10 to 15 years.
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