India’s alternative investment fund ecosystem appears to be entering a more demanding phase of maturity. After years defined largely by capital formation and rapid scheme launches, industry participants are now framing the next chapter around performance accountability and realised outcomes.

The third edition of the CRISIL–Oister benchmarking report, tracking 170 Category I and II AIF schemes investing in unlisted equities, provides quantitative backing to this shift. Over seven benchmarking cycles between March 2022 and March 2025, the aggregated benchmark delivered a pooled internal rate of return of 24.02%, compared with 15.3% for the BSE Sensex TRI. That translates into an average alpha of roughly 8.7 percentage points over listed market returns.

According to Oister Global Co-CEO Sandeep Sinha, the evolution of the benchmarking exercise reflects a structural transition. The first edition sought to establish a credible performance baseline in a fragmented ecosystem. The second edition segmented outcomes by stage. The current edition, he argues, mirrors a market where outcomes carry more weight than momentum and asset gathering.

For an industry that has scaled rapidly, standardisation is not trivial. Nearly 1,600 AIFs are now registered, with cumulative commitments approaching USD 160 billion, or roughly ₹15 lakh crore. About two-thirds of these funds have been launched since FY21, underlining how young and expansion-driven the ecosystem remains. Historically, performance data across private market funds lacked consistent benchmarks, making peer comparison difficult. The CRISIL partnership aims to address that gap by introducing comparability and uniform reporting standards.

However, headline alpha masks a defining feature of private markets: dispersion.

The report highlights that the performance gap between top and average managers remains significant. Unlike listed markets, where information is widely available and price discovery is continuous, private markets depend on proprietary deal sourcing, due diligence depth and sector expertise. That structural characteristic naturally produces wider outcome variation. For investors, this reinforces that manager selection, rather than asset class exposure alone, is critical.

The report also shifts focus from internal rate of return to realised cash metrics, especially distributions to paid-in capital (DPI). Of the 170 schemes analysed, 142 have made distributions. Around 42.25% have returned at least 0.5x DPI, taking an average of 6.51 years. About 25.35% have crossed 1x DPI, taking an average of 7.21 years. At the 1x threshold, average DPI stood at 2.03x, while top-quartile funds that fully returned capital recorded DPI of 3.49x.

This emphasis on realised distributions reflects a broader global context. Exit timelines have elongated, IPO windows have become more selective and secondary liquidity channels have gained relevance. Investors are increasingly asking not only about IRR but about cashflow visibility and liquidity timing. In that sense, the Indian AIF ecosystem is aligning with global institutional investor expectations.

Secondary transactions are emerging as a structural liquidity lever. India’s secondary deal value rose to ₹377 billion in FY25, up 32% year-on-year. In the first half of FY26 alone, deal value reached ₹361 billion, nearly matching the previous full fiscal year. Average deal size has expanded from ₹2.28 billion in FY20 to ₹8.39 billion in H1 FY26. This scaling suggests that secondaries are no longer opportunistic but increasingly embedded within exit strategies.

Another structural shift is the rising share of domestic capital. Domestic participation in Category I and II AIFs has increased to about 55%, up from roughly 50% a year earlier. Greater regulatory clarity and benchmarking transparency appear to be strengthening domestic investor confidence. If sustained, this trend could deepen local ownership of value creation within India’s innovation and growth economy.

Sectoral allocation is also diversifying. The share of the top five sectors in total PE and VC investments has declined from about 85% to 66%, signalling reduced concentration and broader thematic participation. Exposure is extending beyond traditional consumer themes into health tech, climate tech and manufacturing-linked opportunities. Notably, large-ticket transactions above ₹50 crore accounted for around 30% of deal count but nearly 90% of deal value in FY25, underscoring the scale bias in capital deployment.