Beyond mutual funds: Why analysts see SBI Funds' alternative asset business as a long-term growth engine

SBI Funds Management’s leadership in the mutual fund industry is well established, but two recent initiation reports by Emkay Global and Equirus suggest investors should look beyond its flagship business. According to both brokerages, the asset manager’s expanding presence in portfolio management services (PMS), alternative investment funds (AIFs) and specialized investment funds (SIFs) could emerge as an important earnings driver as India’s wealth management industry evolves.

While mutual funds remain SBI Funds’ core business, both reports argue that the company’s alternative asset platform provides an additional avenue for growth, helping diversify revenues and improve profitability over the long term.

Alternative assets emerge as the next growth pillar

Emkay notes that India’s asset management industry is witnessing a gradual shift towards higher-yielding products, particularly equity-oriented offerings and alternative investments such as PMS and AIFs. As affluent investors increasingly seek customized investment strategies beyond traditional mutual funds, these businesses are expected to support better revenue yields and enhance the company’s earnings profile.

Equirus highlights SBI Funds’ leadership in these businesses, describing them as an important differentiator. The brokerage points out that the company operates India’s largest PMS platform, with a 39.7% market share and ₹16.9 trillion of PMS and advisory assets. It also identifies SBI Funds as one of the country’s largest Specialized Investment Fund (SIF) platforms, commanding a 28.2% market share.

PMS, AIFs and SIFs broaden the revenue base

Alternative Investment Funds are another fast-growing segment. According to Equirus, SBI Funds’ AIF assets under management expanded at a compound annual growth rate (CAGR) of around 29% between FY24 and FY26. Over the same period, revenue from non-mutual fund businesses grew at approximately 24% CAGR, underscoring the increasing contribution of these businesses to the company’s overall financial performance.

Unlike mutual funds, which primarily cater to retail investors through standardized investment products, PMS and AIFs typically serve high-net-worth individuals (HNIs), family offices and institutional investors looking for customised portfolio management and alternative investment opportunities. This enables SBI Funds to participate across multiple segments of the asset and wealth management industry rather than relying solely on retail mutual fund inflows.

Higher-margin businesses could support profitability

The reports also suggest that this diversified business mix could help cushion the company from pricing pressure in the traditional mutual fund business. As competition among asset managers intensifies and fee compression remains an industry-wide challenge, higher-margin businesses such as PMS, AIFs and SIFs can support revenue growth and profitability.

Emkay expects the ongoing shift in the company’s asset mix toward equity and alternative investments to help maintain healthy revenue yields while benefiting from operating leverage as assets grow.

Equirus, meanwhile, expects the combination of mutual fund expansion and faster-growing non-mutual fund businesses to drive a revenue CAGR of about 14% and EBITDA CAGR of nearly 15% between FY26 and FY29. It also expects the company’s asset-light business model to sustain strong profitability and return ratios over the medium term.

A diversified growth story

Taken together, the two reports suggest that while SBI Funds’ dominant mutual fund franchise remains the foundation of its business, its expanding footprint in PMS, AIFs and SIFs offers an additional long-term growth lever. For investors evaluating the company’s prospects, the alternative asset business could become an increasingly important contributor to earnings diversification, margin resilience and sustainable long-term growth alongside its market-leading mutual fund operations.