India's AIF Industry: Market Brief February 2026 India's Alternative Investment Fund (AIF) industry has reached a historic milestone, with total cumulative commitments surging past **₹15.74 lakh crore**. This rapid expansion represents a doubling of the market size since 2022, signaling that alternative assets have transitioned from a niche interest to a core component of Indian wealth management. The Rise of Domestic Dominance A fundamental shift in the capital mix is now evident. Domestic investors currently contribute approximately **55%** of total commitments in Category I and II funds. This local anchoring reduces the industry's reliance on volatile global liquidity cycles. High-net-worth individuals, family offices, and increasingly, domestic institutions are filling the space once dominated by foreign capital. Performance and Alpha Generation AIFs continue to demonstrate significant outperformance compared to traditional public markets. Recent data indicates that equity-oriented AIFs have delivered a consistent alpha of **8.69%** over the BSE Sensex TRI. Across multiple benchmarking cycles, the industry has achieved a pooled internal rate of return (IRR) of **24.02%**, far outpacing the **15.3%** seen in public indices. Liquidity through Secondary Markets The emergence of a robust secondary market is addressing the traditional "lock-in" challenge of private capital. Secondary deal values reached **₹361 billion** in the first half of the current fiscal year alone, nearly matching the entire previous year's volume. This provides investors with crucial exit pathways and capital recycling options outside of traditional IPO windows. Sector Concentration and Efficiency Category II funds, which include private equity and private credit, remain the industry heavyweight with **₹11.64 lakh crore** in commitments. Deployment efficiency has also improved significantly, with investments made as a percentage of funds raised reaching **96.2%**. While the top five sectors formerly accounted for 85% of activity, that concentration has dropped to **66%**, with capital now flowing into manufacturing, health tech, and climate-focused enterprises.