How India’s HNIs Are Building Smarter Portfolios in 2025

India’s High Net Worth Individuals (HNIs) are in the midst of a significant shift in how they think about wealth. The traditional formula of equities, bonds, gold, and real estate is being replaced by a more sophisticated strategy that blends public markets with private opportunities, structured products, and intelligent alternatives.

The underlying driver is simple: HNIs are no longer satisfied with wealth preservation alone. They are seeking growth, liquidity, and access to opportunities that create alpha beyond the reach of retail investors.

The Portfolio Mix of Today’s HNI

For decades, Indian HNIs leaned heavily on equities through direct investing and mutual funds, fixed income via bank deposits and bonds, physical real estate as a store of value, and gold for both stability and cultural affinity. These remain important, but three structural changes have altered allocation strategies.

First, low debt yields mean fixed income instruments no longer reliably deliver inflation-beating returns. Second, volatility in public equities has highlighted the need for diversification into lower-correlation assets. And third, the expansion of access to alternatives, such as AIFs, structured products, and private market opportunities, has made sophisticated strategies available to a far broader set of affluent investors through professional wealth managers.

The Rise of Alternatives: AIFs as the Core of the New Portfolio

Alternative Investment Funds (AIFs) have become the cornerstone of HNI diversification. Under SEBI’s regulated framework, they offer institutional-quality exposure across private equity, private credit, real estate, and infrastructure.

Private Equity AIFs allow investors to capture value before IPOs by entering during early, growth, or late stages. Private Credit AIFs provide superior yields by lending to stressed or special-situation businesses, a strategy increasingly relevant in India’s growing private credit market. Real Estate AIFs open the door to Grade A office properties and warehousing through pooled vehicles, combining income with appreciation. And Infrastructure AIFs enable participation in roads, renewables, and logistics platforms, offering steady cash flows alongside long-term value creation.

For many HNIs, AIFs have turned what once existed as exclusive “club deals” into structured, diversified vehicles available on a professional scale.

The Illiquidity Problem and How Secondaries Solve It

While alternatives are attractive, they carry one glaring drawback: illiquidity. Traditional commitments can lock up capital for seven to ten years, with investors waiting for IPOs or acquisitions to realise returns.

The secondaries market has emerged as a transformative force. For sellers, it provides early liquidity and the ability to rebalance portfolios. For buyers, it offers discounted entry into seasoned assets already closer to exit. This creates a rare win-win: sellers unlock capital for new opportunities, while buyers gain access to de-risked positions that may already be value-accretive.

For HNIs, the most important shift is the integration of secondary opportunities into AIF platforms. Rather than sourcing deals individually, investors can now rely on curated baskets of secondary transactions vetted by professionals. This blends liquidity, diversification, and expert diligence into a single, structured approach.

Intelligent Alternatives

The term “intelligent alternatives” has become shorthand for the next generation of portfolio building blocks. In India, these include AIFs and MLDs.

AIFs provide access to private equity, credit, real estate, and infrastructure. They deliver diversification beyond traditional markets and play an offensive role in portfolio design by capturing high-growth, differentiated opportunities.

Market-Linked Debentures (MLDs), by contrast, bring structured debt solutions that blend capital protection with performance-linked potential. Some structures guarantee principal protection even if markets underperform, while others link returns to equity indices, gold, or commodities. Their flexibility across conservative, balanced, and aggressive investor profiles has broadened their adoption.

Together, AIFs and MLDs enable HNIs to construct portfolios that are diversified, flexible, and aligned with risk appetite and market outlook.

The Global Catch-Up of Indian HNIs

Globally, UHNIs and family offices allocate 40–50% of portfolios to alternatives. In India, allocations have historically been lower but are rising quickly. The convergence is being driven by the maturing of domestic private markets, regulatory clarity around AIFs and structured products, and the efforts of private wealth managers in bringing global allocation models to Indian investors.

Why This Matters: The Strategic Edge for Indian HNIs

These shifts represent more than a cosmetic portfolio adjustment; they amount to a strategic edge in wealth creation. Value capture is increasingly happening in private markets before IPOs, making private equity allocations more important. Liquidity options such as secondaries allow flexibility even in long-term commitments. Intelligent alternatives like MLDs bring customisation, letting investors balance protection with performance. AIFs provide exposure to private equity, infrastructure, real estate, and credit, expanding diversification beyond traditional equities and bonds.

Together, these trends point toward a reimagined approach to portfolio construction, one that resembles the endowment-style models used by global family offices.

Risks and Considerations

Despite their appeal, intelligent alternatives are not without challenges. Liquidity constraints persist, as many AIFs still involve multi-year lock-ins, even if secondaries ease this to some extent. Structured products such as MLDs can be complex, requiring clear understanding of payoff mechanisms. And in both AIFs and secondaries, manager quality is paramount as strong diligence and execution skill are critical to outcomes.

This underscores the importance of professional managers in navigating alternatives, ensuring transparency, and accessing the right opportunities.

Looking Ahead: Intelligent Diversification as the Norm

By 2030, intelligent alternatives are expected to account for a significant part of Indian HNI portfolios. Secondaries will continue to deepen liquidity, while AIFs and MLDs evolve with new structures tailored to investor needs.

The old world of HNI investing, heavily weighted toward property and deposits, is steadily giving way to a globally aligned model that emphasizes flexibility, diversification, and resilience. AIFs provide structured access to private markets. Secondaries unlock liquidity. MLDs and other structured products add intelligent debt strategies.

Together, these instruments have become prominent features of the modern Indian HNI portfolio, one designed not just for preservation of capital, but for adaptability across market cycles.

Chief Brand & Investor Relations Officer

Sneha Dadrwal

Frequently Asked Questions

Q: How are HNI portfolios in India changing in 2025?

A: They are moving from traditional reliance on equities, bonds, real estate, and gold to more diversified strategies that include AIFs, secondaries, and structured products like MLDs.

Q: Why are AIFs considered central to the modern HNI portfolio?

A: AIFs provide institutional-style access to private equity, credit, real estate, and infrastructure, which were once available only through exclusive or informal networks.

Q: How do secondaries improve flexibility for HNIs?

A: They allow investors to sell or buy positions mid-cycle, unlocking liquidity for sellers and offering buyers access to seasoned assets closer to exit.

Q: What makes MLDs attractive to affluent investors?

A: MLDs combine capital protection with the potential for higher returns, link payoffs to indices or commodities, and offer flexibility across risk profiles.

Q: How do Indian HNI allocations compare with global peers?

A: Globally, HNIs allocate 40–50% of their portfolios to alternatives. In India, the share is lower but rising rapidly as private markets deepen and access broadens.

Sources

1. Insights adapted from a leading wealth management platform in India