RM is pitching an AIF targeting 16% returns. Should I move my Rs 1.5Cr index fund corpus?

A 16% gross target on a deck can easily translate into a net return that leaves less in your hand than a low-cost Nifty 50 index fund. For an AIF to genuinely beat a plain index fund, it has to clear a massive hurdle that most investors underestimate.

A typical AIF structure charges roughly a 2% annual management fee and takes 20% of the profits as carry. Once you add the specific tax treatment of the category, that compounds against you every year. The return on a fact sheet and the money that actually reaches your bank account are two very different numbers.

Category-level averages can also be highly misleading because outcomes vary enormously by manager and year. An average hides a wide spread between funds that performed brilliantly and those that failed. When funds show target returns of 15% to 18%, you have to remember that a target is an aspiration, not a commitment.

You must interrogate the number to see if it is gross or net of fees, carry, and tax. You also need to check how this specific strategy has actually delivered across full market cycles, not just in one good year.

A realistic projection is a range with assumptions attached, openly stated, and open to challenge. If the pitch glides past management fees and carry, or treats them as a footnote rather than a permanent drag on returns, be very cautious.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.