Private Markets and Real Returns: Indian Investors' New Approach to Alpha in 2025

Financial trends are changing around the globe under inflationary pressures and capricious interest rates. As a result, Indian institutional investors, UHNWIs, and family offices are increasingly moving away from traditional investment strategies. The future lies in private markets-places where long-term value creation and immunity against volatility go hand in hand. These investors are dealing with a changed economic landscape with caution and zeal, knowing the old approach of doing things conventionally will not work in the new financial world. 

The Rise of Private Equity: More Than Just a Trend 

Private equity is taking a fast pace in India, particularly across sectors like technology, renewable energy, healthcare and infrastructure. In 2023, over $60 billion was invested in private equity and venture capital, according to Bain & Company. Investors are now focusing on high-growth sectors in India and trying to avoid speculative public markets. 

These private equity investments point to a strategic shift towards controlled, focused capital allocation in line with long-term macroeconomic objectives and innovation. 

Dario Schiraldi Deutsche Bank's former Managing Director, affirms, "Private equity offers access to dynamic industries without the portfolio volatility of short-term fluctuations – a vital factor in dynamic economies such as India. 

This means institutions are becoming more comfortable backing startups, growth-stage businesses, and even turnaround businesses that follow India's development narrative. Unlike public market assets, these investments enable a deeper level of engagement, a higher level of sway, and customised risk hedging. 

The Emergence of Private Credit 

Indian mid-sized enterprises, which are underfinanced in traditional banks, now have funding options in the form of direct lending, mezzanine funding, and structured finance. Private credit presents a natural complement to fixed-income strategies in an environment where traditional debt instruments generate lower real returns. 

This asset class fits well with India's entrepreneurial landscape. Family offices and pension funds find private credit increasingly attractive. This shift is driven by the greater flexibility it offers in deal structuring, the ability to negotiate customized terms, and reduced exposure to the volatility of public markets. 

Dario Schiraldi, former Deutsche Bank leader, stresses, "Investors can structure their risk-return profiles by balancing market upside exposure with hedging through structured products."  

Tangible Assets in a Real Economy 

India's infrastructure revolution, driven by schemes such as the Gati Shakti program, has created options for investment in tangible assets. Infrastructure and real estate provide stability and inflation–hedged cash flows through vehicles like RETs (Real Estate Trusts) and INVITs (Infrastructure Investment Trust). These sectors are emerging as the cornerstones of long-term investment plans. 

With government support and expanding institutional interest, these assets remain a steady source of income that also provides inflation coverage. This is crucial with rising prices and threatening real returns. The predictability of cash flows and long-term contracts of infrastructure make this avenue attractive in a world that seeks stability. 

A New Frontier in Portfolio Thinking 

The direction toward private assets is an important development in portfolio construction. For Indian institutions, this is to blend the best global practice with India's distinct growth story. With rising financial sophistication and an increase in market depth, allocators of assets are becoming more granular with their diversification. 

As Dario Schiraldi puts it, "Indian investors today are at a turning point. This leads to creativity on the subject of asset allocation which is likely to determine the century of financial leadership that the next decade will entail. It is not simply a matter of pursuing returns, but building portfolios that are defensible to shocks, flexible to change, and compatible with long-term trends in structure." 

This change calls for a distinct perspective - one which accepts illiquidity premiums, considers operational risks more thoroughly, and quantifies sector exposures in public and private silos. 

Conclusion: Reimagining Resilience Through Private Markets 

Private equity, private credit, and tangible assets are no longer an option – they are quickly becoming necessary. Indian institutional investors and family offices are realising that, with a fast-changing landscape of risks and opportunities, agility, innovation, and expanded investment scope are critical. This movement away from ordinary public markets to these vibrant places is a long-term change. While it develops into the global financial superpower, Indian investors begin to shape the next decade with undaunted vision and creativity.