Background/Problems faced by clients 

Alternative investment funds (AIFs) are among the fastest growing managed investment products in India. Despite the pace at which they were being launched, investors had no standard benchmarks available to compare the performance of these AIFs across various strategies. The industry sought a common yard stick to measure the AIFs’ performance, which would let investors make informed decisions about investing.

Solution provided

The industry body appointed CRISIL to create India’s first benchmarks for AIFs. As part of the exercise, our team issued a concept paper and sought industry feedback to ensure relevance to the Indian AIFs. Subsequently, the team created the entire framework for the exercise, including templates for data collection. The team worked closely with the industry body to launch the benchmarks within one-and-a-half months, meeting the stated timelines.

CRISIL AIF benchmarks are updated on a six-monthly basis based on data as on March-end and September-end, each year. In addition to the benchmarks for AIF categories defined by the Securities and Exchange Board of India, i.e. categories I, II and III, CRISIL maintains benchmarks for numerous sub-categories. The benchmarks were developed taking into consideration various facets of the industry and are on a par with global performance metrics.

For AIF categories I and II, the benchmarks use aspects such as pooled internal rate of return (IRR), multiples and realisation ratios. These benchmarks are based on vintage years to bring uniformity in comparison of funds with a similar performance history. For category III, an asset-weighted index was created using quarterly returns and the respective assets under management.

Client impact 

All stakeholders such as investment managers, distributors and investors use CRISIL AIF benchmarks for various purposes like regular disclosures and reporting, performance comparison, and informed investment decision making.

By leveraging our expertise in investment product research and benchmarking, we have created 15 granular benchmarks for various strategies followed by AIFs in India. CRISIL continues to innovate and take feedback from the industry to ensure the benchmarks are relevant for the industry.