How Much of Your Portfolio Should Be in AIFs?

There is no universal percentage that answers this question responsibly, despite how often investors ask for one. A sensible ceiling depends on liquid net worth, ongoing spending needs, existing business and ESOP exposure, real-estate holdings, current private investments and the timing of future capital calls the investor has already committed to elsewhere.

The ₹1 crore SEBI minimum can make a technically eligible investor economically unsuitable for an AIF allocation — meeting the regulatory threshold to invest is not the same question as whether that ticket size is prudent relative to that specific investor's overall balance sheet.

Measure any prospective commitment against investable financial assets — liquid and semi-liquid securities, cash and near-cash — not against headline net worth that includes an illiquid family business, a primary residence, or other assets that cannot fund a capital call on short notice.

Always include unfunded commitments when calculating total private-markets exposure, not just capital already paid in — a ₹3 crore total commitment across two AIFs with only ₹1 crore called so far still represents ₹3 crore of exposure the investor has legally agreed to fund.

Separate capital by its actual job: money intended for long-term growth can reasonably carry more illiquidity, money meant to generate near-term income needs a different risk profile, and money earmarked for a specific near-term obligation — a child's education, a planned property purchase — should never enter an AIF conversation at all.

A founder or promoter may already have the substantial majority of their personal wealth tied up in one illiquid private company — their own — and treating a new AIF commitment as 'diversification' while ignoring this existing concentration is a common and serious miscalculation.

Real estate, whatever its headline value, cannot reliably fund a capital call on short notice — selling a property to meet a drawdown typically takes months and may force a sale at an unfavourable price, precisely when the investor needs the cash on the manager's timeline, not their own.

Committing to multiple funds of the same vintage year can create a later concentration problem the investor did not anticipate — if several funds all target exits in a similar market window, both capital calls and distributions can cluster together rather than smoothing out over time.

Before acting, answer five questions in writing: build an explicit 24-month liquidity map covering all known and probable cash needs; count business ownership, ESOP value and any other unlisted holdings as private-market exposure when calculating a total ceiling, not as separate from it; set a firm maximum illiquid-assets ceiling as a percentage of investable financial assets, before shopping for any specific fund; pace new commitments across different vintage years and strategies rather than committing to several similar funds simultaneously; and recalculate the entire picture after every major liquidity event, since capacity that made sense a year ago may no longer apply.

Capacity to write a ₹1 crore cheque is not the same thing as capacity to carry a ₹1 crore illiquid commitment for 8-10 years — the first is a bank-balance question, the second is a genuine risk-tolerance and financial-planning question.