Indian AIFs in Gulf Stare at Sea of Uncertainty
Indian alternative investment firms that were pursuing Gulf capital are facing an uncertain pause, with high-net worth individuals, family offices, institutions and sovereign investors in the region turning cautious and becoming more selective with deployments amid the current regional conflict.
Indian alternative investment firms that were pursuing Gulf capital are facing an uncertain pause, with high-net worth individuals, family offices, institutions and sovereign investors in the region turning cautious and becoming more selective with deployments amid the current regional conflict. Several India-focused venture capital, real asset managers, private credit and asset management firms have expanded to the Gulf over the last few years and opened offices, tapped limited partners, or launched dedicated vehicles to raise capital from the UAE and the wider Gulf Cooperation Council (GCC). But fresh commitments have slowed sharply in recent weeks, forcing some fund managers to redraw fundraising plans and explore investors in Africa and Europe instead. Besides, some sovereign investors have informally indicated a preference for vehicles that will deploy capital locally.
They also prefer backing sectors aligned with national economic development priorities.
An India-based alternative investment firm focused on real assets that opened its Dubai office two years ago told ET that investors want to wait for the fog of war to clear.
"We have close to $500 million in soft commitments," said an executive at the firm, which is raising its first investment vehicle in the region.
"While investors have said that they understand the opportunity, and would like to invest, they would wait until they understand where the bottom is. They want to know much pain is left, and what the economic and workforce impact will be."
India-focused firms that have been tapping Gulf capital or have set up offices in the region include Nisus Finance, Cedar Hill Capital, Quadria Capital, Aditya Birla Sun Life Realty Credit Fund, Evolvence India, Orios Venture Partners and ASK Asset and Wealth Management.
"There's a vacuum forming," said Amit Goenka, chairman and managing director of Nisus Finance. "I've been meeting with my limited partners and banks. Banks have started operations, but private investors are being very conservative. There is a lot of capital on the sidelines, but patience is required until this comes to finality."
Nisus Finance launched a $500 million Gulf-focused real estate fund in Dubai in August 2024 and has invested in key assets in the city.
Cedar Hill Capital is not as badly affected as it's raised more than 80% of the target but those in the early stages of fundraising are facing challenges. The early stage venture capital firm received a key commitment from an Abu Dhabi royal family office in November for its debut fund.
"If I had raised only 40% of the fund and were depending heavily on Middle East capital right now, I would be worried," said Sahil Anand, founder and managing partner of Cedar Hill Capital. "Any fund manager currently under pressure to complete a close is in a difficult position, as the Middle East has effectively gone into pause and an important limited partner geography has dried up for now."
KAAF Investments chief financial officer Nandi Vardhan Mehta said that while committed capital is being deployed, fresh investment decisions are on hold.
"If it is committed it will get fulfilled, but if a decision was not made, and we were about to say yes, we have put that on hold," Mehta said. "Right now, it is wait and watch in terms of investment. We are holding on to cash. We want to wait for an outcome and then we will get back to investing again."
The Dubai-based, single-family office, which manages a fund-of-fund and direct bets portfolio, has invested in India via seven fund managers.
STRESS IN RETAIL
More stress is particularly visible on the retail side, with most HNI investors in the region in "panic mode" as they want to preserve cash.
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