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Have you ever wondered where India's biggest rich invest their money? In the last two years, there has been a major change among the country's billionaires (families whose wealth is Rs 10 crore or more). There was a time when he loved mutual funds and real estate, but that is no longer the case. Instead, they are investing crores of their wealth in 'AIF' i.e. Alternative Investment Funds. And within that too, the highest demand is for those funds which focus on small and medium businesses.

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A 'speed-breaker' is installed on mutual funds

Mutual funds have played a big role in inculcating good investment habits among the people in India. It brought common people to the stock market through Systematic Investment Plan (SIP). But for those who want to earn huge profits, some rules of mutual funds act as a limit.

According to SEBI rules, no mutual fund manager can invest a large portion of the fund (say 20%) in any one company. This means that even if there is a small company whose market cap is only around Rs 200 crore, but it has tremendous growth potential, mutual funds cannot invest huge amount in it. This is so that the investment can be divided among many places to reduce the risk. But for big investors, this rule is like a 'speed-breaker', which prevents them from taking full advantage of the momentum of the Indian market.

Then what is this AIF?

Alternative investment funds (AIFs) work quite differently from mutual funds. Especially in Category I and Category III AIFs, fund managers have the freedom to choose a few companies, research them in-depth and then invest large amounts of money in them.

To invest in such funds, a minimum of Rs 1 crore is required. Therefore common people cannot invest in it directly. These funds are only for those big investors who have the ability to take more risk and can keep the money invested for a long time.

SME: Those 'diamonds' on which no one has an eye

In India, there are more than 5000 small companies listed on platforms like BSE SME and NSE Emerge. But big institutional funds or common investors do not know much about them. These include companies making parts for the defense sector, specialty chemicals, domestic logistics and EPC companies in the infrastructure sector. Many of these companies are registering an increase in earnings of 25% to 40% every year and their financial condition is also quite strong. AIF funds are investing money in these places, where big funds cannot reach easily.

The market for April 2024 is proof

The month of April 2024 was quite volatile for markets around the world. Major indices were shaken due to political tensions and global economic uncertainties. But these Indian SME companies, which are dependent on the domestic market, were not much affected by the global crisis. Even during these difficult times, funds focused on SMEs have outperformed the larger indices. This strengthened the belief of big investors that the real growth engine of India is not only the Nifty 50 companies, but also these emerging companies with market cap of Rs 500 crore to Rs 2000 crore.

What can ordinary investors learn from this?

The real growth is hidden in those domestic companies which are forming the backbone of the Indian economy, but which are not paid much attention to. If you want to build great wealth over the next decade, ask yourself if you are investing in places where there is real growth? Big investors had discovered this path years ago, but even today this path is open to common investors.

Note: The information given in this article is not intended to be a direct advice or recommendation for investing in the market. Investments in the stock market and AIFs are subject to market risks. There is no guarantee that the past performance of any investment scheme will remain the same in the future. Before investing, it is important to seek advice from a SEBI-registered financial advisor and do your own research. This article will not be responsible for any losses arising from financial decisions.