Why Indian HNIs are turning to AIFs for smarter returns, Puneet Sharma of WhiteSpace Alpha explains
Over the medium to long term, large-cap stocks are expected to deliver steady annual returns in the range of 12–15%, Puneet Sharma says
- Oct 17, 2025,
- Updated Oct 17, 2025 3:40 PM IST
Alternative Investment Funds (AIFs) are becoming increasingly popular among high-net-worth individuals (HNIs) in India. They give investors access to innovative strategies and a wider range of opportunities beyond traditional investment options. In this insightful conversation with BT, Puneet Sharma, CEO and Fund Manager at WhiteSpace Alpha, shares his views on the types of investors entering this space, key sectors of focus, fund performance, and smart ways to protect wealth during market volatility. Q). What types of investors typically invest in Category III AIFs?
Puneet Sharma: Category III AIFs are primarily designed for sophisticated investors such as high-net-worth individuals (HNIs), family offices, and corporates. Since the minimum ticket size is Rs 1 crore, these funds naturally attract investors who understand both the potential and the risks of active investment management.
Broadly, we see two key investor segments. The first are family offices and institutions that already have experience with structured products and are seeking risk-adjusted alpha beyond traditional equity and debt allocations. The second are individual HNIs who want to enhance portfolio returns while maintaining a controlled risk profile, often comparable to retail-focused instruments but with greater flexibility and strategic exposure. Q). What are some key sectors or industries that your fund is currently focused on, and why? How do you see the trend going ahead?
Sharma: We remain optimistic about the Indian equity markets. Over the medium to long term, large-cap stocks are expected to deliver steady annual returns in the range of 12–15%, supported by healthy earnings growth and macroeconomic stability. While our investment approach is largely sector-agnostic, we find compelling opportunities in industries poised to benefit from India’s next phase of reforms — particularly FMCG, white goods, and the two-wheeler segment. These sectors stand to gain from GST 2.0, rising consumption, and stronger rural demand. Overall, India’s economic fundamentals remain robust, and we expect markets to gradually scale new highs as earnings momentum continues. Q). How has the fund performed so far, and what’s the plan to sustain or improve it?
Sharma: Our funds have consistently outperformed their respective benchmarks since inception, not just on an annual basis but quarter after quarter. The goal has always been to deliver stable alpha with controlled volatility, which we achieve through disciplined portfolio construction, rigorous risk management, and continuous monitoring of market data. Looking ahead, we are expanding our strategy mix and investing in data-driven models to further optimise performance. In addition, our international fund based in GIFT IFSC is opening avenues to participate in global opportunities. The core objective remains the same: to generate alpha consistently every month while keeping downside risks minimal. Q). What kind of returns can investors expect from Category III AIFs over the long term?
Sharma: Category III AIFs encompass a wide range of strategies from long-short equity and market-neutral funds to absolute-return products. For funds with an equity bias, investors can reasonably expect 18–25% CAGR over a 3–5-year horizon, depending on market conditions and leverage levels. For those in the debt or absolute-return category, returns typically range between 12–15% CAGR. It’s important to note that Category III AIFs are not yet structured as tax pass-through vehicles, so post-tax returns will depend on individual investor profiles. Nonetheless, they remain one of the most effective tools for long-term wealth creation with a strong focus on risk-adjusted outcomes. Q). How do you view the role of alternative investments in a diversified Indian portfolio?
Sharma: Alternative investments are increasingly becoming a core component of a well-diversified portfolio. They allow investors to access opportunities that are not typically available through public markets, such as distressed assets, unlisted growth companies, or structured hedge strategies. These instruments also play a valuable role in reducing portfolio correlation and smoothing volatility. By combining traditional investments with select alternative products, investors can enhance their overall return potential without significantly increasing risk. As India’s capital markets mature, I expect alternatives to occupy a larger and more strategic allocation within investor portfolios. Q). What strategies would you recommend for protecting wealth during economic uncertainty or market volatility?
Sharma: The best protection is discipline and diversification. Spreading exposure across asset classes — equities, debt, gold, and alternatives- helps manage both return expectations and downside risk. Investors should also set clear goals and review allocations periodically, rather than reacting emotionally to short-term volatility.
At the same time, it’s healthy to allocate a small portion of one’s risk capital to high-growth opportunities, whether in new-age sectors or emerging asset classes — but only after understanding their volatility profile. Equally important is knowing when to recalibrate. If the fundamentals of a sector or business shift permanently, portfolio adjustments are necessary.
In short, the key is to stay invested through uncertainty but remain flexible enough to adapt when the market narrative genuinely changes. That balance between conviction and caution is what truly protects wealth over time.
Alternative Investment Funds (AIFs) are becoming increasingly popular among high-net-worth individuals (HNIs) in India. They give investors access to innovative strategies and a wider range of opportunities beyond traditional investment options. In this insightful conversation with BT, Puneet Sharma, CEO and Fund Manager at WhiteSpace Alpha, shares his views on the types of investors entering this space, key sectors of focus, fund performance, and smart ways to protect wealth during market volatility. Q). What types of investors typically invest in Category III AIFs?
Puneet Sharma: Category III AIFs are primarily designed for sophisticated investors such as high-net-worth individuals (HNIs), family offices, and corporates. Since the minimum ticket size is Rs 1 crore, these funds naturally attract investors who understand both the potential and the risks of active investment management.
Broadly, we see two key investor segments. The first are family offices and institutions that already have experience with structured products and are seeking risk-adjusted alpha beyond traditional equity and debt allocations. The second are individual HNIs who want to enhance portfolio returns while maintaining a controlled risk profile, often comparable to retail-focused instruments but with greater flexibility and strategic exposure. Q). What are some key sectors or industries that your fund is currently focused on, and why? How do you see the trend going ahead?
Sharma: We remain optimistic about the Indian equity markets. Over the medium to long term, large-cap stocks are expected to deliver steady annual returns in the range of 12–15%, supported by healthy earnings growth and macroeconomic stability. While our investment approach is largely sector-agnostic, we find compelling opportunities in industries poised to benefit from India’s next phase of reforms — particularly FMCG, white goods, and the two-wheeler segment. These sectors stand to gain from GST 2.0, rising consumption, and stronger rural demand. Overall, India’s economic fundamentals remain robust, and we expect markets to gradually scale new highs as earnings momentum continues. Q). How has the fund performed so far, and what’s the plan to sustain or improve it?
Sharma: Our funds have consistently outperformed their respective benchmarks since inception, not just on an annual basis but quarter after quarter. The goal has always been to deliver stable alpha with controlled volatility, which we achieve through disciplined portfolio construction, rigorous risk management, and continuous monitoring of market data. Looking ahead, we are expanding our strategy mix and investing in data-driven models to further optimise performance. In addition, our international fund based in GIFT IFSC is opening avenues to participate in global opportunities. The core objective remains the same: to generate alpha consistently every month while keeping downside risks minimal. Q). What kind of returns can investors expect from Category III AIFs over the long term?
Sharma: Category III AIFs encompass a wide range of strategies from long-short equity and market-neutral funds to absolute-return products. For funds with an equity bias, investors can reasonably expect 18–25% CAGR over a 3–5-year horizon, depending on market conditions and leverage levels. For those in the debt or absolute-return category, returns typically range between 12–15% CAGR. It’s important to note that Category III AIFs are not yet structured as tax pass-through vehicles, so post-tax returns will depend on individual investor profiles. Nonetheless, they remain one of the most effective tools for long-term wealth creation with a strong focus on risk-adjusted outcomes. Q). How do you view the role of alternative investments in a diversified Indian portfolio?
Sharma: Alternative investments are increasingly becoming a core component of a well-diversified portfolio. They allow investors to access opportunities that are not typically available through public markets, such as distressed assets, unlisted growth companies, or structured hedge strategies. These instruments also play a valuable role in reducing portfolio correlation and smoothing volatility. By combining traditional investments with select alternative products, investors can enhance their overall return potential without significantly increasing risk. As India’s capital markets mature, I expect alternatives to occupy a larger and more strategic allocation within investor portfolios. Q). What strategies would you recommend for protecting wealth during economic uncertainty or market volatility?
Sharma: The best protection is discipline and diversification. Spreading exposure across asset classes — equities, debt, gold, and alternatives- helps manage both return expectations and downside risk. Investors should also set clear goals and review allocations periodically, rather than reacting emotionally to short-term volatility.
At the same time, it’s healthy to allocate a small portion of one’s risk capital to high-growth opportunities, whether in new-age sectors or emerging asset classes — but only after understanding their volatility profile. Equally important is knowing when to recalibrate. If the fundamentals of a sector or business shift permanently, portfolio adjustments are necessary.
In short, the key is to stay invested through uncertainty but remain flexible enough to adapt when the market narrative genuinely changes. That balance between conviction and caution is what truly protects wealth over time.