Here’s the right method to assess AIF performance
Alternative investment funds invest mostly in unlisted investments such as start-ups, early-stage ventures, real estate, infrastructure, and distressed assets. Here are some performance metrics: AIFs, especially category I and II, are closed-end investment vehicles with cash flows that are controlled and staggered based on available entry and exit opportunities, as identified by investment managers. Since performance comparison across funds should be done for the same period, a common practice is to compare with a group with similar starting year or ‘vintage’. Distributions to paid-in capital is a key metric to evaluate the money returned versus money managed quotient, while the residual value to paid-in capital helps gauge unrealized gains. As of March 2022, venture capital fund benchmarks across vintages 2016-2021, barring 2019, delivered higher returns than other sub-categories under category I and II.
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