Influence of Macroeconomic factors on Alternative Investment Funds

Abstract

This study examines the relationship between key macroeconomic variables and the growth of Alternative Investment Funds (AIFs) in India from 2015 to 2022. It analyzes the correlation between the annual growth of AIF categories and macroeconomic indicators such as GDP growth, inflation, real interest rates, FDI inflows and outflows, unemployment, tax revenue, the Nifty 500 index, and mutual fund investments. Using correlation analysis and simple linear regression, the findings show that only Category I AIFs significantly correlate with FDI outflows, while real interest rates and unemployment display moderate R-squared values of around 0.4 and 0.5.The results suggest that traditional macroeconomic factors have limited predictive power for AIF investment behaviour in India, indicating that AIF growth may be driven by more complex variables, possibly including industry-specific or policy-related factors. This research contributes to the understanding of the alternative investment landscape and has important implications for investment strategies, risk management, and policy formulation in India's rapidly evolving AIF sector.