MUMBAI: Sebi chairman Tuhin Kanta Pandey has advised the nearly Rs 16 trillion (commitments) alternative investment funds (AIFs) industry to look at real opportunities for growth by investing in innovation-led sectors, emerging businesses, climate transition, sustainable infrastructure and other priority sectors.
Pandey said there are more than 1,700 registered AIFs in the country and as of December 2025, investment commitments stood at about Rs 15.74 trillion and investments at about Rs 6.45 trillion, with a compounded annual growth rate of close to 30% in the past five years.
“For you, the bigger opportunity lies in where capital goes and what it helps create. We need long-term capital for healthcare, education, climate transition, sustainable infrastructure, and other priority sectors. AIFs can help channel domestic and global capital to these areas,” Pandey told an ICVA (Indian Venture Capital Association) summit here Wednesday.
“A key issue that AIFs should address is whether enough capital is going to growth, innovation, and sunrise sectors. AIFs are expected to fund innovation and early-stage enterprises. However, as of December 2025, only about Rs 20,500 crore of AIF capital has gone to start-ups," he said.
“If private capital stays too conservative, a core purpose of the AIF framework is lost. The industry can do much more to back innovation-led sectors and emerging businesses,” the chairman said.
Pandey also asked them to improve investors' trust in AIF managers by not mi-selling, offering better and realistic valuation and return promises and making better and more timely disclosures.
Speaking about the challenges that the AIF industry faces, he said the first challenge is mis-selling and product suitability. AIFs are meant for sophisticated investors and are patient capital, involving illiquid assets, long holding periods, complex structures, and differentiated risk-return profiles, he said.
“So the potential of higher returns cannot be separated from the disclosure of higher risks. Managers and distributors must clearly disclose key terms. Risk profiling must become a real discipline, not a box-ticking exercise,” he said.
Another area that needs discipline is valuation. “AIFs often invest in early-stage and illiquid assets. In such cases, credibility begins with valuation. Weak or opaque valuations erode confidence. When your investee companies move towards public markets, valuation concerns can distort price discovery and weaken trust. Therefore, fair valuation matters,” he said.
He also urged the industry to improve transparency by strengthening monitoring and reducing operational risks, saying such measures help build trust in a market that is becoming more sophisticated.
Pandey also asked them to improve their governance by offering accurate and timely disclosures, consistency with disclosed fund terms, clear segregation of roles, effective conflict management, and strong internal controls.
“In short, growth must be accompanied by standards. That is non-negotiable. While the IVCA has helped promote professionalism, improve standards, and facilitate constructive dialogue between industry and regulators so far, going forward, policy advocacy should reflect the diversity of the industry by staying aligned with investor protection and market integrity. Because the credibility of any industry body rests on the trust it builds with all stakeholders--members, investors, and regulators alike,” he concluded.