The indices will cover all three AIF categories and provide investors with a metric to compare the performance of a scheme with the peer set.
Crisil Research is the research arm of domestic rating agency Crisil.
Crisil Senior Director Nagarajan Narasimhan said that after a tepid start a decade ago, the Indian AIF industry has grown exponentially in recent years and commitments of Rs 3.85 lakh crore have been raised between 2012 to June 2020.
A common performance metric is elusive and the benchmarks are intended to plug this gap by providing a metric to compare performance of AIFs with the category average.
Benchmarking develops a set of standardised performance metrics to help investors identify efficient fund managers, detect risks and take sound investment decisions, the agency said in a statement.
It also provides a yardstick to fund managers and other stakeholders such as the board and internal committees to compare themselves.
The ensuing transparency would encourage fund managers to leverage on best practices and provide a level playing field to all stakeholders in the presence of only one performance differentiator, the relevant benchmark, it said.
“The benchmarks have been created to incorporate various facets of the industry and are aligned with global practices,” its director Piyush Gupta said.
For AIF categories I and II, the benchmarks use aspects such as pooled internal rate of return, multiples and realisation ratios. These benchmarks are based on vintage to bring uniformity in comparison of funds with a similar performance history, he noted.
For category III benchmarks, quarterly returns along with respective assets under management have been used to create an asset-weighted index at the category-level from the quarter in which at least three schemes were available to invest, the agency said in the statement.
Returns are calculated on a post-expense, pre-carry and pre-tax basis, both in rupees and US dollars, for all the three categories, it added.
Common category-level peer benchmarks have been created to compare AIFs in each category, the agency said and added that as the industry matures, sub-category indices based on investment strategy and mandate will also be developed.