Key Takeaways
- • Aashwin Duggal, newly appointed CEO of Nippon Alternatives, says regulators should raise insurer investment limits, currently 3% for life insurers and 5% for general insurers, to deepen India's domestic capital base for Category II AIFs.
- • SEBI data show total AIF commitments reached Rs 17.53 lakh crore as of June 2026, up nearly 24% year-on-year, with Category II funds accounting for Rs 13.03 lakh crore.
- • EPFO is considering allocating up to 3% of fresh annual accretions to Category I and II AIFs, with a proposal expected before its Central Board of Trustees in November.
- • Duggal argues that longer-duration private credit assets may match insurers' liability profiles, making insurers and pension funds natural long-term capital providers.
Summary
Aashwin Duggal, the newly appointed CEO of Nippon Alternatives, told Moneycontrol that India's Category II alternative investment funds (AIFs) need a wider pool of long-term domestic capital to sustain their growth, and that insurers and pension funds could play a larger role. He called on regulators to consider raising investment limits for life and general insurers, which currently stand at 3% and 5% respectively. Citing global practice, he noted that insurers in some markets allocate around 20% of AUM to alternatives.
The regulatory framework is already shifting. Earlier in 2026, the Insurance Regulatory and Development Authority of India widened insurers' investment options, including permitting investments in equity and debt of private limited companies and easing norms for infrastructure financing through special purpose vehicles. Under the revised framework, life insurers can invest up to 3% of life or segregated funds, and general insurers up to 5% of investment assets, across private limited companies, AIFs and venture funds combined. Industry reports indicate insurers have nearly doubled their commitments to private credit funds over the past two years.
On pension capital, Duggal backed a gradual, safeguards-led pathway for the Employees' Provident Fund Organisation (EPFO) to access Category II AIFs. The EPFO is considering up to 3% of fresh annual accretions for Category I and II AIFs, with the proposal expected before its Central Board of Trustees in November. It has not yet invested in SEBI-regulated Category I or II AIFs, and any move would require final trustee approval. Proposed safeguards reportedly include a minimum AIF corpus of Rs 100 crore, caps on exposure to individual funds, restrictions on overseas-incorporated entities and fund-manager independence requirements. Initial investments may route through the National Investment and Infrastructure Fund and SIDBI's Startup India Fund of Funds 2.0.
Duggal also flagged growing domestic institutional interest in private credit, particularly performing and high-yield strategies, from insurers and family offices. SEBI's annual report recorded 1,829 registered AIFs as of March 2026, of which 1,019 were Category II. He cautioned, however, that Category II investments are illiquid with multi-year horizons and require patient capital, with governance, valuation, liquidity and concentration risks needing careful management.
The regulatory framework is already shifting. Earlier in 2026, the Insurance Regulatory and Development Authority of India widened insurers' investment options, including permitting investments in equity and debt of private limited companies and easing norms for infrastructure financing through special purpose vehicles. Under the revised framework, life insurers can invest up to 3% of life or segregated funds, and general insurers up to 5% of investment assets, across private limited companies, AIFs and venture funds combined. Industry reports indicate insurers have nearly doubled their commitments to private credit funds over the past two years.
On pension capital, Duggal backed a gradual, safeguards-led pathway for the Employees' Provident Fund Organisation (EPFO) to access Category II AIFs. The EPFO is considering up to 3% of fresh annual accretions for Category I and II AIFs, with the proposal expected before its Central Board of Trustees in November. It has not yet invested in SEBI-regulated Category I or II AIFs, and any move would require final trustee approval. Proposed safeguards reportedly include a minimum AIF corpus of Rs 100 crore, caps on exposure to individual funds, restrictions on overseas-incorporated entities and fund-manager independence requirements. Initial investments may route through the National Investment and Infrastructure Fund and SIDBI's Startup India Fund of Funds 2.0.
Duggal also flagged growing domestic institutional interest in private credit, particularly performing and high-yield strategies, from insurers and family offices. SEBI's annual report recorded 1,829 registered AIFs as of March 2026, of which 1,019 were Category II. He cautioned, however, that Category II investments are illiquid with multi-year horizons and require patient capital, with governance, valuation, liquidity and concentration risks needing careful management.
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