CRISIL Research today launched sub-category-level benchmarks for the domestic alternative investment fund (AIF) industry.

These benchmarks are the logical next step to the original category-level benchmarks introduced in October 2020 and provide peer comparison for AIFs belonging to seven sub-categories within the three broad AIF categories — I, II and III.

The move will usher in granularity and enable metrics-driven investment decision-making by stakeholders in the fast-growing industry, based on due comparison of equivalent funds.

Says Jiju Vidyadharan, Senior Director, CRISIL Research, “The Indian AIF industry continues to grow at a healthy pace, with commitments increasing 42% between March 2021 and March 2022 to Rs 6.41 lakh crore. With investors embracing the product and the industry maturing, there is a need for enhanced benchmarking practices. CRISIL’s sub-category AIF benchmarks will plug this gap, providing like-to-like fund comparison within its category.”

The benchmarks have been developed in accordance with the Securities and Exchange Board of India (SEBI) guidelines and in consultation with industry participants.

The following sub-categories have been considered:

• Category I
  • Venture Capital Funds (VCFs)
• Category II
  • Equity Funds – Unlisted
  • Equity Funds – Listed + Unlisted
  • Real Estate Funds
  • Debt Funds
• Category III
  • Long-only Equity Funds
  • Long-short Equity Funds

Says Piyush Gupta, Director, CRISIL Research, “The sub-categorisations are based on the type of assets in underlying funds and the availability of a sufficient number of funds during a year. The sub-category level benchmarks will be useful to all stakeholders — investors, intermediaries, and AIFs alike — as they provide a 360-degree view of the performance of a particular sub-category. These will help investors home in on the type of fund best-suited to their investment objective, besides enabling intermediaries to focus on specific types of funds for their clients, and AIFs to compare their performance with a peer set.”

Some other key findings from the sub-category benchmarking are as follows.

• Equity Funds – Listed + Unlisted have the largest asset size, at Rs 49,500 crore, followed by Long-only Equity Funds under Category III (Rs 33,600 crore)
• VCFs under Category I outperformed among the five sub-categories considered within Category I and II for vintages FY17 and FY18, while Equity Funds – Listed + Unlisted and Debt Funds under Category II came out tops among funds belonging to vintages FY19 and FY20, respectively
• Debt Funds belonging to all the vintage years have outperformed CRISIL Composite Bond Fund Index
• Long-only Equity Funds have underperformed the Long-short Equity Funds over three- and five-year periods. The long-short equity funds benchmark has not given any negative return for a three- or five-year rolling return period since its inception in September 2015
• Long-Short Equity Funds benchmark was better able to protect downside than their long-only peers over three-year rolling returns, with minimum of 6.03% returns compared with -6.49% for the latter

The category and sub-category level AIF benchmarks data will be disclosed on half-yearly basis (based on September and March end data), as per guidelines prescribed by SEBI. The benchmarks will be published on www.crisil.com along with the methodology.

The benchmarks for March 2021 and the detailed methodology can be found at https://www.crisil.com/en/home/what-we-do/financial-products/alternate-investment-funds-benchmarks.html