Transparency and disclosures are becoming a major problem for India’s rapidly growing  Alternative Investment Fund (AIF) ecosystem. High Net Worth Individuals (HNIs) and  family offices are increasingly participating in Category I and Category II AIFs, which has  led to a resurgence of long-standing concerns about investor visibility, benchmarking, and  performance disclosures.  

The ongoing discussion sheds light on the conflict between rating agencies, investors, and  fund managers on the appropriate level of information sharing in an increasingly complex  and mature market. A recent private conference between the Indian Venture and Alternate  Capital Association (IVCA), CRISIL, a few fund managers, and family office founders  

brought this issue to light. The panelists discussed whether venture and growth-stage AIFs  should continue to operate with restricted public visibility on returns, despite the fact that the  investor base is growing and becoming more knowledgeable.  

Conversations on Disclosure Without a Final Resolution  

Whether Category I and II AIFs should take a more methodical approach to revealing fund level results was one of the main topics of discussion. Sources acquainted with the  conversations claim that although IVCA acknowledged the concerns expressed by investors,  there was insufficient reason for the restricted disclosures.  

As of right now, IVCA has said that it is open to provide ad hoc and fund-specific data  exchange upon request. It hasn’t, however, committed to a centralized, standardized, or real time disclosure process. The larger structure for transparency remains essentially unaltered as  a result.  

On the other hand, Category III AIFs, which generally employ hedge fund-like tactics, 

already offer mark-to-market reporting and partial portfolio disclosures. The secrecy  surrounding early-stage and growth-oriented funds, whose performance data is mostly still  only available to current investors, has been further brought to light by this distinction. 

Expectations of Investors Are Changing 

The evolving nature of investors in the alternative investing market is driving the desire for  increased transparency. As the market has developed, investor expectations have changed  dramatically, according to Munish Ramdev, CEO and founder of Cervin Family Office. 

Investors are demanding category-level data as the industry matures. “Anecdotal performance  is no longer adequate,” he declared. 

Ramdev also noted that it could be necessary to reevaluate how investors are classified under  the current AIF standards. He claims that investors who commit ₹10 crore are better  categorized as HNIs rather than ultra-HNIs in the current climate, and as such, they may  legitimately demand access to information that helps them make well-informed decisions. He  stated that investors may evaluate portfolio risks, benchmark performance, and deploy capital  more efficiently with the aid of transparent disclosures. 

Benchmarking Remains a Structural Difficulty 

The lack of standardized standards for Category I and II AIFs is another persistent issue. AIF  performance measurements are still dispersed and uneven, in contrast to mutual funds or  portfolio management services, where performance data is routinely monitored and publicly  compared. 

Even widely used metrics like CRISIL ratings or vintage-year IRRs might be deceptive,  according to some participants, particularly when funds have different exit horizons, capital  deployment schedules, and sector focuses. 

“Precincts” as a Possible Middle Route 

The idea of “precincts”—controlled-access platforms where fund managers could share  performance data with authorized stakeholders like rating agencies or specific investors  without making the information fully public—was discussed by participants as a way to close  the gap between transparency and confidentiality. 

Advocates think this strategy might protect competitive positioning and unique techniques  while increasing openness. 

Fund Managers Warn 

However, fund managers voiced worries about unexpected repercussions from public  disclosures. They cautioned that even competent managers might be adversely affected  during early deployment or departure stages by sporadic underperformance, which is frequent  in venture and growth investment. 

Confidentiality, competitive hazards, and the potential to promote short-term performance  chasing, especially among smaller funds, were among issues brought forward.

As India’s AIF sector develops, striking a balance between fund manager flexibility and  investor transparency is becoming a key problem for the industry’s next stage of expansion.