Private equity, credit strategies, long–short funds, and bespoke mandates are now mainstream for serious capital. That’s why alternative investments in India are no longer niche. Scale hasn’t reduced risk; it has shifted it. Now, the biggest mistakes don’t come from market cycles; they come from poor partner selection.
This is a practical diligence framework for evaluating alternative investment partners in India, beyond pitch decks and past IRRs.
1. Strategy Clarity and Drift Control
Before returns, understand intent.
Most funds sound differentiated at launch, but many quietly morph when markets turn. The first job of due diligence is to test how tightly the strategy is defined.
What exactly is the fund built to do, and what will it never do?
How concentrated can positions become, and who approves exceptions?
If this is a multi-asset fund, who decides allocation shifts and under what triggers?
How has the strategy behaved during past drawdowns, not rallies?
A clear strategy doesn’t guarantee returns, but it prevents accidental risk.
2. Governance, Decision Rights, and Accountability
Returns are optional. Governance is not.
In India, governance dispersion is one of the few durable sources of alpha and loss. Understanding who holds power matters more than who speaks on earnings calls.
Who sits on the investment committee, and who has veto rights?
Is decision-making centralised or genuinely debated?
In discretionary fund management, who executes trades without client consent, and within what limits?
What happens if the lead decision-maker exits?
Strong governance reduces dependence on personalities.
3. Alignment, Fees, and the Net Return Reality
Headline performance hides more than it reveals.
Investors should always bridge gross returns to what actually lands in their account.
How much sponsor capital is invested alongside LP money?
Are fees structured around high-water marks and real hurdles?
What does a realistic gross-to-net return look like after all costs?
Who bears operating, transaction, and compliance expenses?
Alignment isn’t about trust; it’s about incentives.
4. Liquidity, Exit Mechanics, and Stress Scenarios
Entry is easy. Exit is earned.
India rewards patient capital but punishes forced sellers. Liquidity planning is part of portfolio construction.
What percentage of exits came from IPOs versus secondary or strategic sales?
Are side pockets permitted, and under what conditions?
What happens if markets freeze or regulations change mid-cycle?
How is liquidity communicated during stress periods?
Illiquidity isn’t a flaw; uncertainty is.
5. Regulation, Compliance, and the 2025 Reality
Compliance failures surface quietly, then suddenly.
With tighter SEBI oversight and enhanced PPM audit scrutiny, operational discipline now matters as much as investment skill.
When was the last regulatory audit, and were deviations reported?
How transparent is ongoing reporting versus annual summaries?
Who owns compliance, the fund or outsourced providers?
How are tax obligations handled across structures?
Strong compliance protects capital when markets don’t.
Conclusion
Choosing alternative investment partners in India is ultimately about risk ownership, not return forecasting. The best managers are defined less by performance charts and more by discipline, governance, and clarity under pressure.
Many allocators today prefer structured platforms that institutionalise these controls rather than relying on single-manager risk. Vehicles like the Vedas Opportunities Fund sit within this broader shift, one of several ways investors access alternatives while outsourcing governance complexity. In alternatives, trust isn’t assumed. It’s verified.
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