# Next Horizon Capital: Research Notes, Full Text > Every published research note from https://nexthorizoncapital.in/research as plain text, for language models. > Company context: https://nexthorizoncapital.in/llms.txt > 11 notes, newest first. Regenerated on every deploy from the Sanity dataset. --- # India’s Lawsuits Are Becoming Investable - Litigation Funding via AIFs *Litigation finance is emerging as a new alternative asset class in India, with institutional capital beginning to back legal claims and recoveries.* - URL: https://nexthorizoncapital.in/research/india-s-lawsuits-are-becoming-investable-litigation-funding-via-aifs - Published: 19 September 2026 - Authors: Sandeep Menon - Category: Alternative Investments - Reading time: 5 minutes Summary: With global litigation finance projected to reach US$64.76 billion by 2035, Five Rivers Capital’s ₹500 crore fund signals the emergence of an institutional market in India, where capital is deployed against the eventual recovery from lawsuits. India’s litigation-finance market is beginning to acquire the characteristics of an alternative asset class. The global litigation-funding investment market was estimated at US$23.58 billion in 2024 and is projected to reach US$64.76 billion by 2035, implying a 9.62% CAGR. Against this backdrop, India is beginning to build its own institutional market. Five Rivers Capital Fund I, with a target corpus of ₹500 crore, is the first Alternative Investment Fund regulated by SEBI to launch in India specifically to invest in legal-finance assets. At the same time, ₹4.38 lakh crore was involved in 1,878 pending insolvency avoidance applications as of March 2026, pointing to a potentially sizeable pool of claims that may require capital to be monetised. [Figure: India’s litigation market is beginning to look less like a legal cost centre and more like an emerging alternative asset class. Globally, litigation finance is projected to grow from US$23.58 billion in 2024 to US$64.76 billion by 2035. India is now beginning to build the institutional infrastructure to participate in that market, led by Five Rivers Capital’s ₹500 crore Category II AIF. With 1,878 pending insolvency avoidance applications involving ₹4.38 lakh crore, the potential opportunity extends well beyond conventional commercial disputes. Our latest piece examines how legal claims are being underwritten, financed and transformed into investable assets.] For most investors, a lawsuit remains an expense. Legal fees accumulate, capital remains tied up and the outcome can take years to determine. Litigation finance introduces a different proposition: a legal claim can itself become an investable asset. A third-party funder provides capital to pursue a claim in exchange for a share of the eventual recovery. If the case fails, the funding is generally non-recourse, meaning the claimant does not repay the capital. The investor, rather than the claimant, bears the investment risk. This is the model Five Rivers is now bringing into an institutional fund structure in India. Five Rivers Capital Fund I is a SEBI-registered Category II AIF with a target size of ₹500 crore, managed by Fivcap India Advisors. The fund completed its initial close on 4 December 2025 and has a final close scheduled for December 2027. It intends to make between 10 and 18 investments across different case types and tribunals, rather than rely on a single litigation outcome. The distinction matters. This is not simply a new way of paying legal bills. It is an attempt to apply private-market underwriting to legal claims. Five Rivers says it evaluates cases on legal merits, claim size, enforceability, counterparty risk and expected duration. Its stated focus is on claims worth at least US$15 million, or approximately ₹125 crore, with a preferred resolution period of five years or less. For an alternative investor, the attraction lies in the source of the underlying return. Litigation outcomes are not directly determined by equity valuations, interest rates or corporate earnings. The investment instead depends on the probability of a successful claim, the size of the eventual recovery, the time taken to reach a resolution and the ability to enforce the outcome. That makes litigation finance a form of event-driven investing, with potentially significant upside but a distinctive set of risks. The global market suggests that institutional capital is becoming increasingly comfortable with the concept. Litigation finance has developed from a specialist practice in markets such as Australia, the United Kingdom and the United States into a multi-billion-dollar industry. A 2025 academic review describes third-party litigation funding as having evolved from a niche concept into an alternative investment strategy involving specialist fund managers, hedge funds and institutional investors. India, however, is still at the beginning of this process. The country's enormous volume of litigation creates a large theoretical opportunity, but the number of cases is not itself an investment thesis. Most disputes will never be suitable for institutional funding. What matters is whether a claim has sufficient economic value, strong legal merits and a credible route to recovery. Commercial litigation, arbitration, insolvency and enforcement proceedings are therefore likely to be among the earliest areas of institutional adoption. The insolvency market is particularly interesting. As of 31 March 2026, 1,878 avoidance applications under the Insolvency and Bankruptcy Code involved more than ₹4.38 lakh crore. These proceedings can require substantial legal, investigative and forensic expenditure before any recovery is realised. The Ministry of Corporate Affairs is now examining whether third-party funding could be used to pursue preferential, undervalued, fraudulent and extortionate transactions, commonly referred to as PUFE matters. That development could prove more consequential than litigation funding as a standalone investment product. An insolvency estate may contain a legitimate claim but lack the capital required to pursue it. External funding effectively converts that unfunded claim into a financeable recovery opportunity. The investor supplies capital today against the possibility of receiving a portion of a recovery several years later. The economics therefore resemble neither conventional private equity nor private credit. There is no operating company generating EBITDA and no contractual coupon protecting the investor. Instead, the underwriting revolves around probability-weighted outcomes. Portfolio construction becomes particularly important because individual cases can produce substantial dispersion between investments. The 2025 academic research notes that portfolio funding has become an increasingly important model in mature markets because diversification reduces dependence on any single legal outcome. Five Rivers' entry is significant because it gives this emerging market an institutional wrapper. India has seen litigation-finance activity before, but the creation of a SEBI-regulated AIF dedicated to legal-finance assets introduces a structure familiar to private-market investors: committed capital, investment selection, portfolio construction and defined fund economics. The question now is whether India can develop enough surrounding infrastructure for the strategy to scale. Better legal analytics could improve underwriting. Greater familiarity among companies and law firms could expand the supply of investable claims. Clearer rules around disclosure, funder rights and recoveries could reduce uncertainty. If insolvency authorities increasingly recognise third-party funding as a means of pursuing recoveries, the addressable market could extend well beyond conventional commercial litigation. Five Rivers is therefore more than the launch of another Category II AIF. It is an early indication that the boundary between legal claims and financial assets is beginning to narrow in India. The global market is already demonstrating that capital can be deployed against the outcome of disputes. India now has an institutional vehicle explicitly built around that proposition. The next question is not whether India has enough lawsuits. It is whether enough of those lawsuits can be underwritten, diversified and monetised consistently enough to become a repeatable alternative-investment strategy. --- # GPs Are Buying Companies From Themselves, At Full Price. *Continuation vehicles are changing how private-market investors create liquidity and extend ownership.* - URL: https://nexthorizoncapital.in/research/gps-are-buying-companies-from-themselves-at-full-price - Published: 12 September 2026 - Authors: Sandeep Menon, Angad Singh, Sadhik Bhatia - Category: Secondaries - Reading time: 5 minutes Summary: As high-quality private assets increasingly transact at or near NAV, continuation funds are evolving from liquidity solutions into a new mechanism for extending ownership. Since the establishment of the capital markets with their secondary counterparts, the latter has carried a simple reputation; it implied it’s where private assets went when someone wanted to let go of their stake. This liquidity came at the cost of a discount to the NAV. The buyer of said commodity has historically paid for taking on risk, illiquidity and uncertainty of duration or return, and the seller was expected to compensate them for it. As we move towards the top end of the market, this precedent that has been steadily established over the many levels of financial markets starts to crumble. The secondary market is losing its discount. [Figure: GP-led secondary volume rises sharply from 2015 to 2025, alongside major continuation-fund transactions.] Last week, we covered how the discipline of vintage diversification broke down when private equity deployed the lion’s share of its capital at its highest entry prices. When these assets move to the terminal side of their lifecycles, the stark evolution the mechanism has had for high-quality assets becomes apparent. This week, we’ll cover the background behind this change. Exemplifying the effect of the data represented above, Lazard shows that 56% of single-asset continuation-fund transactions were priced at, or above NAV. 87% were priced at 90% of NAV or higher. The numbers are rather striking, not because the aforementioned discounts have vanished, but seemingly since quality private assets don’t warrant one. Instead of treating these secondaries as instruments in distress needing to be disposed off, the figures show assets accounting to continuation funds are becoming a mainstream, standard way of extending ownership beyond one PE fund’s lifetime. The assets commanding true premiums no longer need to be sold untimely, confined by the years left for the PE. The secondary market is beginning to look less like a market for distressed liquidity but one that does not require discounts to enable transfer, since the assets seemingly pay for themselves. This evergreen and private-wealth capital creates a deeper pool of buyers while recognising the asset and linking it to intrinsic quality. The Discount Is Becoming Selective A traditional secondary transaction is often driven by a seller’s need for cash. A continuation vehicle can be driven by almost the opposite motivations. The GP does not want to sell yet. Not withstanding the standard life of the fund, the assets need not be confined to the number of years left with the fund. The underlying company may still have years of value creation left along the road. That changes the very framework of a standard secondary transaction; the buyer is no longer being compensated for an incidental burden he would have to bear, but being offered continual exposure to an asset that has already survived the most difficult parts of a private-market thesis. The sponsor, in such a situation, has owned it, developed it and hands-on demonstrated an investment thesis. This is readily apparent in single-asset continuation vehicles. In 2024, only a relatively small slice of these transactions required deep discounts, while the overwhelming majority cleared at 90% of the NAV or higher. The market demonstrates that it can efficiently differentiate between assets that need a discount to create demand and assets that intrinsically warrant demand. India’s Exemplary Landscape The Indian market provides a sparkling illustration of the same phenomenon. The market’s former continuation vehicles were relatively modest, multi-asset structures which were assembled primarily to create liquidity while preserving exposure to businesses that sponsors still wanted to have stakes in. The same exemplified by Samara Capital, established a roughly $150M vehicle, centred around 3 portfolio companies: FirstMeridian, Paradise Food Court & Sahajanand Med Tech. The structure solved a straightforward concern, one that, in hindsight, seems like it should’ve happened before; existing investors could now take on liquidity, while those who remained bullish could roll their exposure into new vehicles, encouraging injection of new capital. The transactions that followed this began to look different. In 2024, ChrysCapital raised a $700M continuation vehicle around its stake in NSE. Multiples PE subsequently raised $430M for a vehicle holding Vastu Housing Finance, Quantiphi and APAC Financial Services. The market, hence, moved from a structure that aimed to solve a liquidity issue to one of India’s most valuable financial-market assets. One which has, more surprisingly, risen from the secondary market, with the purpose of extending ownership of the portfolio’s best investments. The secondaries are starting to appear to perform a function that looks increasingly similar to portfolio construction and management thereof. The Exit Moved on the Same Plane Continuation funds, by nature, point to a broader change in how PE thinks about exits. The traditional model, linearly following an “invest - appreciate - sell - return capital” timeline, now evolves into a more flexible one that also includes the processes of recapitalisations and continual ownership with an exit that is more eventual than before. The fund’s legal life no longer has to dictate the asset’s true economic life. The exit shall not be forced by itself. This caveat makes said vehicles less of an emergency liquidity mechanism but more of a permanent piece of market infrastructure. GPs can retain their high-conviction assets, allowing injection of new funds without waiting for a new primary fund life cycle. The asset has not “changed hands” like an ordinary secondary transaction. The ownership clock has simply been reset. The secondary market was once built around the idea that liquidity warranted a discount. But as we reach the trophy end of the spectrum, it is increasingly becoming a market where investors demand the privilege of having the exposure the asset offers. --- # 2021: When Private Equity’s Capital and Valuations Peaked Together *2021 put more buyout capital to work at higher entry multiples than any other vintage, exposing LPs to concentration that vintage labels conceal.* - URL: https://nexthorizoncapital.in/research/2021-when-private-equity-s-capital-and-valuations-peaked-together - Published: 6 September 2026 - Authors: Nakul Goel, Sadhik Bhatia, Angad Singh - Category: Private Equity - Reading time: 4 minutes Summary: PE's “vintage diversification” playbook assumes that steady commitments smooth entry prices across cycles. 2021 broke that discipline: $1.1 trillion was deployed at near-record buyout multiples, creating a vintage where capital concentration & valuation risk peaked together. Every institutional playbook says the same thing about private equity: pace your commitments consistently across vintage years. Commit a steady amount every year, the logic goes, and you average into the market, buying some vintages cheap and some dear, smoothing your entry price across cycles. It is the private-markets version of dollar-cost averaging, and it is treated as settled discipline. [Figure: 2021: When Private Equity’s Capital and Valuations Peaked Together] The data says the discipline was not followed, and that even where it was, it did not deliver what LPs think it delivered. Start with what actually peaked. Buyout fundraising did not peak in 2021. Bain records $387 billion raised that year, the second-best on record, and buyout funds raised more in 2023. So a chart titled "capital raised by vintage" does not support the concentration argument. What peaked, and by a wide margin, was capital deployed. Bain reports buyout deal value hit $1.1 trillion in 2021, "doubling 2020's total of $577 billion and shattering the previous record of $804 billion set in 2006." Deployment, not fundraising, is where the exposure lives, because deployed capital is the capital actually exposed to that year's entry price. Now overlay price. Global buyout median entry multiples reached 12.4x in 2021, against a 2015-2020 average of about 10.55x. In the US the peak was sharper, near 14x. So 2021 is the one year in the series where the most capital in history entered at close to the highest prices in history. No other year did both. That is the real finding, and it is more precise than the headline: 2021 was not simply expensive, it was expensive at scale. Two honest corrections keep this defensible. First, multiples did not stay uniquely high in 2021. They recovered. Global multiples reached 12.3x in 2024, and US buyout medians matched the 2021 record at 12.5x in 2025. As PitchBook's Garrett Hinds put it, "In 2021, buyers paid up because money was nearly free. In 2025, they paid up despite rates that were far higher, and they funded the difference with equity rather than debt." Second, the effect on a blended portfolio's entry price is modest in aggregate: capital-weighting the multiple across 2019-2025 lifts it only about 0.16 turns above the simple average. The concentration bites hardest not on the index but on the individual LP that leaned in. And some did lean in, hard. CalPERS committed roughly $2.7 billion a year to private equity on average from 2009 to 2018, then $19.5 billion to the 2021 vintage alone. Its own investment team now calls 2021 a "challenged vintage" and describes the prior pattern as procyclical. That is the opposite of consistent pacing. It is buying the most when prices are highest, which is precisely how vintage diversification quietly becomes vintage concentration. The performance data is already scoring the bet. PitchBook's pooled DPI by vintage falls in a straight line: 1.37x for 2015, down to 0.25x for 2020 and just 0.13x for 2021. The 2021 vintage's median net IRR is about 10.7%, versus 15-18% for 2015-2019, and it is trailing the S&P 500 on a public-market-equivalent basis. The most-capitalized, highest-priced vintage is the slowest to return cash. The forward problem is arithmetic. Bain's "12 is the new 5" captures it: a deal that needed 5% annual EBITDA growth to reach 2.5x in the leverage-and-multiple-expansion era now needs 10-12%. A dollar deployed at 14x buys less earnings than a dollar deployed at 10x, and it must exit into a market that may clear lower. Peak-priced vintages carry the heaviest operational burden precisely because financial engineering can no longer carry them. For LP underwriting, the question is not how many vintages you own. It is how many dollars you deployed in 2021, at what multiple, and how much EBITDA growth those assets now require to clear. Count dollars and turns, not vintage labels. --- # The IPO Is Taking Longer. Private Markets Have Built a Side Door. *As companies stay private for longer, secondaries are emerging as an increasingly important source of liquidity for founders, employees, investors and GPs.* - URL: https://nexthorizoncapital.in/research/the-ipo-is-taking-longer-private-markets-have-built-a-side-door - Published: 29 August 2026 - Authors: Sandeep Menon - Category: Private Markets - Reading time: 4 minutes Summary: The IPO is no longer the only path to liquidity. As private companies stay private longer, a rapidly expanding secondary market is creating new ways for investors and founders to realise value before a public listing. For decades, the IPO was the cleanest answer to a simple question: how does a private company turn years of paper value into liquidity? That equation is changing. Companies are staying private for longer, while investors, founders and employees still need ways to realise value before the public markets arrive. MSCI’s latest research captures the structural shift clearly: the median age of companies at IPO has trended upward over time, while the number of venture-backed companies valued at $1 billion or more has crossed 1,200 globally. The longer private phase has created demand for an alternative liquidity venue, and the secondary market is increasingly filling that role. [Figure: Chart showing median company age at IPO rising from 8.0 years in 2018 to 12.0 years in 2025 alongside secondary-market volume increasing from $75 billion to $233 billion, illustrating the growth of private-market liquidity.] The Exit Is Moving Inside the Private Market The scale of that shift is difficult to dismiss as a niche phenomenon. Lazard estimates that global secondary transaction volume reached $233 billion in 2025, up 53% from $152 billion in 2024. The market was almost evenly divided between $116 billion of GP-led transactions and $117 billion of LP-led transactions. This is particularly notable because traditional exit markets were recovering at the same time: global IPO issuance increased 48% in 2025 and announced M&A value rose by roughly 40%. Secondaries were not simply filling a vacuum left by a closed IPO market; they were expanding alongside it. Lazard describes the secondary market as becoming an established liquidity tool for sponsors and LPs. That changes the role of the secondary transaction. It is no longer necessarily a last resort for an investor desperate to sell. GP-led continuation vehicles allow managers to extend the holding period of attractive assets while giving existing investors a route to liquidity. Lazard estimates that ~50% of 2025 secondary volume was GP-led, while GPCA notes that continuation vehicles are increasingly being used to retain high-quality assets rather than simply solve an end-of-fund problem. India Is Becoming a Test Case India provides an especially interesting view of this transition. GPCA identifies India as the market that has captured much of Asia's recent secondary momentum. In the last 18 months covered by its August 2025 report, ChrysCapital raised a $700 million continuation vehicle for the National Stock Exchange, followed by Multiples Alternate Asset Management raising $430 million to extend its hold of Vastu Housing Finance, Quantiphi and APAC Financial Services. Chiratae Ventures also sold assets including Lenskart, Bizongo and Rentomojo for $70 million in a direct secondary transaction. GPCA says the Indian market is seeing a deepening pool of both buyers and sellers, including growing international participation. The more interesting question is whether these transactions represent distressed liquidity. EY's April 2026 analysis suggests they often do not. Looking at 306 concurrent primary and secondary transactions between January 2019 and December 2025, EY found that roughly 85% occurred at the same or higher value than the concurrent primary investment, with discounts of up to 5% treated as immaterial. Only 46 transactions showed discounts greater than 5%, and those transactions recorded an average discount of 19%. The finding suggests that, when primary capital is still validating a company's valuation, secondary liquidity does not necessarily require a meaningful haircut. But Liquidity Is Not Yet Universal There is an important caveat. A larger secondary market does not mean every private company is suddenly liquid. MSCI estimates that more than 1,200 venture-backed companies globally are valued at $1 billion or more, but says investors looking to buy shares in the secondary market today are likely limited to fewer than 100 companies. Liquidity remains concentrated in the most sought-after names. That concentration may be the next opportunity. As secondary trading expands, the market needs better pricing data, greater transparency and more standardised infrastructure. MSCI's launch of venture-backed private-company indexes, built using secondary-market data from specialist providers, is itself evidence of that institutionalisation. What was once an opaque bilateral transaction is gradually becoming a market with observable prices, specialist intermediaries and benchmarks. The implication is bigger than simply “more startups are doing secondaries.” The private-company lifecycle is being rebuilt around multiple liquidity points. Founders and employees no longer have to view the IPO as the only meaningful monetisation event. GPs can hold high-conviction assets longer without waiting indefinitely for a public listing. LPs can rebalance portfolios without necessarily waiting for fund maturity. The IPO is not disappearing. It is simply losing its monopoly on liquidity. The companies and investors building the infrastructure around that shift, pricing, marketplaces, tender offers, continuation vehicles and transaction execution, may ultimately matter as much as the companies waiting to go public. The private market did not solve the IPO delay. It built a side door. --- # The Whitespace in AI × Travel: The Chatbot Isn't Enough *Why the next opportunity in travel AI may lie beyond recommendations, in the systems that can actually execute the journey.* - URL: https://nexthorizoncapital.in/research/the-whitespace-in-ai-travel-the-chatbot-isn-t-enough - Published: 24 August 2026 - Authors: Sandeep Menon, Angad Singh - Category: AI - Reading time: 4 minutes Summary: As itinerary generation and recommendations become commoditised, the larger whitespace may lie in agentic systems that can connect fragmented travel infrastructure, act on behalf of travellers and automate the operational work behind every journey. Travel may be one of the clearest examples of an AI category where the interface is advancing faster than the underlying business model. Every major travel platform can now generate an itinerary, recommend a hotel or answer a destination question. The experience looks dramatically better, but the economics are less obvious. The more interesting question is therefore not whether AI can make travel planning easier, but where it can actually change the economics of the travel transaction. [Figure: The Whitespace in AI × Travel: The Chatbot Isn't Enough] The First Wave Is Already Becoming a Commodity Generative AI has entered travel quickly. Amadeus found that the share of travellers using GenAI for travel planning increased from 11% to 18% in 2025, yet 25% of users reported receiving outdated or inaccurate information. The adoption curve is revealing: consumers are increasingly comfortable asking AI for advice, but considerably less comfortable allowing it to act. McKinsey and Skift found that more than 90% of travellers have some confidence in AI-generated travel information, while only 2% are willing to let AI take full control of booking or modifying a trip without human oversight. The implication is that the first generation of travel AI competes primarily on information. Destination research, itineraries and recommendations are becoming increasingly easy to generate, making the interface itself difficult to defend. The next economic opportunity therefore has to sit further downstream, where AI can influence the transaction rather than simply improve the conversation around it. The Value Moves When AI Can Act The difference between an AI assistant and an AI agent is ultimately economic. An assistant can tell a traveller that a delayed flight may cause them to miss their hotel check-in. An agent could potentially identify the problem, search alternatives and execute the necessary changes. Travel contains an enormous number of these repetitive decisions: bookings change, connections move, cancellations occur, customers request refunds and itineraries have to be rearranged. These are not fundamentally conversational problems. They are workflow problems. EY's analysis of more than 10,000 tasks across Indian enterprises estimates potential GenAI productivity gains of 80% in call-centre management and 44% in customer service. Travel is particularly suited to this transition because significant operating costs sit behind the customer experience in support, booking changes, reconciliation, disruption management and supplier coordination. The economic value of AI may therefore come less from producing a better answer and more from eliminating the work that follows the answer. India Adds Another Layer of Opportunity India makes this opportunity particularly interesting because rapid digital adoption sits alongside a highly fragmented supply base. Alongside airlines and large OTAs sits a long tail of hotels, homestays, local transport providers, guides and regional experiences, much of which remains difficult to discover, compare or transact through conventional digital interfaces. This creates two potential opportunities. The first is making existing digital inventory easier to transact. The second is making previously inaccessible inventory legible to machines and consumers. An AI system capable of understanding unstructured descriptions, regional preferences, languages and highly localised experiences could potentially turn fragmented supply into searchable and eventually bookable inventory. The opportunity is therefore not simply a better travel search engine. It is better market-making infrastructure for an industry with enormous amounts of poorly surfaced supply. The Agentic Travel Opportunity Is Still Early The technology is moving, but adoption shows how early the market remains. McKinsey's survey of travel executives found that 90% already use generative AI somewhere in their organisations, while only 2% report widespread use of agentic AI. The industry has largely figured out how to put AI in front of the customer. It has not yet figured out how to give AI enough access to inventory, systems and workflows to make it economically consequential. That is where the interesting companies may emerge: not necessarily another chatbot or itinerary generator, but products that sit deeper in the transaction, where AI can reduce operating costs, increase conversion, surface fragmented supply or execute decisions that previously required human intervention. The first wave of travel AI made the interface smarter. The next wave will have to make the transaction itself smarter. --- # ₹15.7 Lakh Crore Committed. So Where Is The Capital? *India's AIF industry has accumulated a record pool of committed capital, but less than half had been invested by December 2025. The gap says more about capital absorption than capital scarcity.* - URL: https://nexthorizoncapital.in/research/inr15-7-lakh-crore-committed-so-where-is-the-capital - Published: 15 August 2026 - Authors: Sandeep Menon, Angad Singh - Category: Alternative Investments - Reading time: 4 minutes Summary: India's AIF commitments reached ₹15.74 lakh crore by December 2025, while investments made stood at ₹6.45 lakh crore. The ₹9.29 lakh crore gap raises an important question: can India's private markets generate enough opportunities to absorb the capital being committed? Last week, we asked whether the celebrated 35% search-fund IRR actually described the investor's experience. The distinction was between what an asset class reports and what an investor actually receives. This week, the same distinction appears in India's alternative investment industry, but at a different level. [Figure: AIF commitments versus investments made across India's three AIF categories, showing the largest deployment gap in Category II.] India has no shortage of private capital. What it has is a growing distance between capital committed and capital invested. By December 2025, India's AIF industry had accumulated ₹15.74 lakh crore of commitments. Investments made stood at ₹6.45 lakh crore. That leaves roughly ₹9.29 lakh crore of committed capital that had not yet been invested. The headline number therefore needs a second number beside it. ₹15.74 lakh crore is the industry's capital capacity. ₹6.45 lakh crore is the capital that has actually gone to work.That distinction matters. ### The Gap Is Concentrated Where Private Markets Are Most Private The divergence becomes clearer inside Category II, which accounted for ₹11.64 lakh crore, or roughly 74%, of total AIF commitments at the end of 2025. Investments made by Category II funds stood at ₹3.84 lakh crore, implying deployment of approximately 33% of commitments. Category III, by comparison, had invested ₹2.14 lakh crore against ₹3.12 lakh crore of commitments, or roughly 68%. The difference is not surprising. Category II encompasses much of India's private-market infrastructure: private equity, private credit, real estate and other strategies investing across less-liquid assets. These funds are designed to deploy capital over time rather than immediately convert commitments into investments. That makes the ₹9.29 lakh crore gap less useful as a measure of "idle capital" than it first appears. It is better understood as a pool of committed but not-yet-deployed capital, and that distinction changes the question. ### India Doesn't Have A Funding Shortage The broader investment data makes that clear. Indian PE/VC investment reached $60.7 billion across 1,475 deals in 2025, up 8% in value and 9% in volume year on year. Fundraising was even stronger: $23.2 billion, more than double the $9.8 billion raised in 2024. Deal count also reached a record high. The contrast with 2024 is instructive. Venture funding had already rebounded to $13.7 billion, up 43% from 2023, while deal count jumped from 880 to 1,270. Yet VC fundraising fell 35% to $2.7 billion, its lowest level since 2020.Capital was therefore moving through the system even when new fundraising was weak. The same is now true in reverse: capital commitments are abundant even as not all of that capacity has yet translated into investments. ### The Real Constraint Is Absorption This is where the ₹15.74 lakh crore figure becomes more interesting. CRISIL's analysis shows AIF commitments grew at a 31.5% CAGR between FY21 and FY25, reaching ₹13.49 lakh crore by March 2025. By September 2025, more than 1,600 AIFs were registered with SEBI, with approximately 61% registered during the preceding four-and-a-half years. The industry's capacity has therefore expanded rapidly. But capital formation and capital deployment do not move at the same speed. The investment committee still has to approve the deal. The valuation still has to make sense. The fund still has to underwrite the business. And the manager still has to believe the return justifies locking up capital for years. That is why the most useful interpretation of India's undeployed AIF capital is not that ₹9.29 lakh crore is sitting uselessly on the sidelines. It is that India has accumulated a substantial forward pipeline of capital capacity, while the market still has to produce enough opportunities at valuations that justify putting it to work. That is a more demanding question than whether India has enough money. The next constraint may not be capital. It may be the supply of investable opportunities good enough to absorb it. --- # The Search Fund Mirage: Why 35% IRR Isn't Your Return *A new Yale study reveals why the celebrated 35.1% IRR reflects the performance of an ecosystem, not the experience of the average investor.* - URL: https://nexthorizoncapital.in/research/the-search-fund-mirage-why-35-irr-isn-t-your-return - Published: 8 August 2026 - Authors: Sandeep Menon, Nakul Goel - Category: Search Funds - Reading time: 4 minutes Summary: For decades, a 35.1% IRR has defined the search fund asset class. But a landmark Yale study suggests the headline benchmark tells only half the story. The real question isn't what search funds returned, it's how many investors actually earned those returns. Last week, we argued that private equity's return engine has fundamentally changed. Multiple expansion is no longer doing the heavy lifting. Returns increasingly have to be earned through operational improvement rather than financial engineering. This week, we move one layer further upstream. [Figure: Stanford's celebrated 35.1% search fund IRR has become the industry's defining statistic. A new Yale study of 1,192 investments shows why the average can be misleading, revealing that investor outcomes depend far more on portfolio construction and exposure to rare outlier returns than headline benchmarks.] Before debating how private markets generate returns, it is worth asking a simpler question. How much of the industry's reported performance actually belongs to the average investor? Few asset classes illustrate this better than search funds. For nearly four decades, the Stanford Graduate School of Business Search Fund Study has been the industry's definitive scoreboard. Its latest figures are extraordinary: a 35.1% internal rate of return and a 4.5x multiple on invested capital. Those numbers have become the asset class's calling card, repeated across fundraising decks, MBA classrooms, podcasts and conference panels as evidence that Entrepreneurship Through Acquisition is among the most attractive strategies in private markets. Then, in October 2025, researchers at Yale School of Management asked a different question. Instead of measuring the headline performance of the asset class, they measured the returns that investors actually experienced across portfolios. The distinction sounds subtle. It isn't. One describes an ecosystem. The other describes an investor's reality. Once those two concepts are separated, one of private markets' most celebrated performance statistics begins to look remarkably fragile. ### The Average Was Never Typical The Yale study examined 1,192 individual search fund investments, one of the largest deal-level datasets assembled for the strategy. Its conclusion was not that Stanford's numbers were incorrect. Rather, they were statistically misleading as a representation of what most investors should expect. Returns followed an unmistakable power-law distribution. A very small number of extraordinary outcomes accounted for a disproportionate share of the asset class's aggregate performance, while the majority of investments generated far more modest results. Approximately 58% of individual deals returned less than 2x invested capital, and only a handful produced the exceptional outcomes that lift the overall average to 35% IRR. This phenomenon is hardly unique to search funds. Venture capital has long exhibited similar characteristics, where a small number of companies create most fund returns. What makes search funds different is how frequently the headline statistic is presented without equal emphasis on the underlying distribution. Investors naturally anchor on averages, even when averages describe almost nobody. The practical implication is significant. A headline return measures the performance of an asset class. It does not necessarily describe the experience of a diversified investor operating within that asset class. Those are fundamentally different questions, yet they are often treated as interchangeable. ### Portfolio Construction Matters More Than Manager Selection The Yale findings also shift attention toward something institutional investors have understood for years but individual investors often underestimate: portfolio construction matters as much as manager selection. A power-law distribution changes the mathematics of diversification. Missing a small number of exceptional outcomes can dramatically reduce realised returns, while adding additional median-performing investments contributes comparatively little. In other words, the portfolio's success depends less on consistently finding "good" companies than on ensuring exposure to the rare companies that become extraordinary ones. This explains why many sophisticated allocators evaluate private markets differently from retail investors. They underwrite portfolios rather than individual deals. They expect a meaningful proportion of investments to underperform because they recognise that exceptional outliers ultimately drive aggregate returns. The Yale paper demonstrates that many investor portfolios never captured enough of these outliers to resemble the celebrated Stanford benchmark. The average investor was participating in the same asset class but experiencing an entirely different return profile. The benchmark remained mathematically accurate while simultaneously becoming practically unattainable for most participants. It is a useful reminder that averages often conceal more information than they reveal. ### The Right Benchmark Isn't The Average. It's The Distribution. The broader lesson extends well beyond search funds. Private markets increasingly celebrate headline statistics because they are simple to communicate. Average IRRs, median exit multiples and aggregate MOICs fit neatly into presentation slides and investment memoranda. Distributions do not. Yet distributions determine outcomes. The relevant question for investors is no longer "What did this asset class earn?" but rather "What is the probability that my portfolio earns it?" Those are entirely different underwriting exercises. For search funds, the Yale evidence suggests the celebrated 35.1% IRR should be viewed less as an expected return and more as a description of what becomes possible when an investor successfully captures a very small number of exceptional businesses. That is a meaningful distinction. It changes how portfolios should be built, how capital should be diversified and, perhaps most importantly, how expectations should be set. As private markets continue to mature, investors may need to become more sceptical of averages altogether. The next generation of superior allocators will not simply ask what the benchmark was. They will ask how many investors actually reached it. --- # 12 Is The New Five: The Math That Just Killed Average Private Equity *Cheap leverage and multiple expansion once did most of the heavy lifting. Today, private equity must earn returns the difficult way: through sustained operational growth.* - URL: https://nexthorizoncapital.in/research/12-is-the-new-five-the-math-that-just-killed-average-private-equity - Published: 31 July 2026 - Authors: Nakul Goel, Hriday Chandna, Sandeep Menon - Category: Private Equity - Reading time: 4 minutes Summary: A decade ago, 5% annual EBITDA growth was enough to generate attractive buyout returns. Today, the same deal often requires more than double that. Why "12 is the new 5" marks a structural shift in how private equity creates value. In 2015, a sponsor buying a company at 10 times EBITDA, financing half the purchase price with debt priced around 6%, and exiting five years later at 12.5 times EBITDA needed only 5% annual EBITDA growth to deliver a 2.5x MOIC. [Figure: Stacked bar chart comparing sources of private equity value creation across three eras, showing operational improvement replacing multiple expansion and leverage as the primary driver of returns by 2020–2025.] Run the identical arithmetic on a 2025 buyout, entry multiples near 14 times, leverage down to roughly a third of enterprise value, debt priced near 8%, and the growth rate required to clear the same 2.5x bar rises to approximately 11%. Bain & Company states this comparison in its 2026 Global Private Equity Report as a rule of thumb: 12 is the new 5. We rebuilt the underlying LBO model independently rather than take the conclusion on faith, and it holds: across a wide range of entry multiples (10x–13x), exit assumptions, leverage levels, and interest rates, the growth rate a 2025 vintage needs to match a typical 2015 deal clusters between 9% and 15%, never close to 5%. This is not a cyclical dip. It is a structural repricing of how private equity returns get made. What changed Three inputs moved at once, and each used to work in the sponsor's favor. Entry multiples, which averaged roughly 9x EBITDA across 2010–2022 according to McKinsey's Global Private Markets Report, reached a record 11.8x in 2025. Debt got both more expensive and less available: McKinsey reports debt financed 37% of the typical entry multiple in 2025, down from a 44% average between 2010 and 2022, even as benchmark LBO borrowing costs sit several points above the near-zero base rates that prevailed through most of the 2010s. And the tailwind that used to paper over both problems, buying low and selling high on the multiple alone, has gone flat: roughly 80% of GPs surveyed by Bain and StepStone in early 2026 expect multiples to hold, not expand. Where the returns actually came from The scale of the shift shows up cleanly in return-decomposition data. McKinsey, citing StepStone Group analysis, finds that for buyout vintages completed between 2010 and 2022, leverage and multiple expansion together accounted for 59% of investor returns, operating performance supplied the remaining 41%. Go back further, to the 1990–2006 buyout wave studied by Guo, Hotchkiss and Song in the Journal of Finance, and the pattern holds in kind: rising industry valuation multiples and the tax benefits of added leverage were, in the authors' framing, each about as important as operating gains in explaining realized returns. That balance has now inverted. McKinsey reports that specialist buyout funds, managers with real sector depth, derived just 5% of their 2010–2022 returns from multiple expansion, versus 35% for generalists, while generating roughly four times as much value from margin expansion. Specialists also posted higher pooled IRRs (17% vs. 13%) and lower loss ratios. Separately, Bain reports that revenue growth alone accounted for 71% of value created in company exits completed in 2024, up from 64% the year before. We can triangulate this independently. Solving our own model for the EBITDA growth a 2025 deal needs to reach 2.5x, then decomposing that deal's value creation the same way McKinsey decomposes realized deals, produces a growth share of roughly 75% of total equity value created, a forward-looking, assumption-driven estimate landing within a few points of Bain's backward-looking, realized-deal figure of 71%. Two unrelated methods converging on the same order of magnitude is the kind of confirmation that should update anyone's prior. The industry is already repositioning, not just talking about it McKinsey finds that operating groups at private equity firms have, on average, more than doubled in size since 2021, independent of fund size, meaning this is a structural buildout, not a byproduct of AUM growth. KKR's Capstone platform, founded in 2000 as a small team, now runs roughly 100 full-time operating professionals across every strategy the firm runs. Vista Equity Partners' internal consulting group numbers over 200. Apollo's own 2026 commentary is explicit that the prior decade's returns "could substitute for genuine value creation" with cheap debt and multiple expansion, and frames the current environment as private equity returning to its roots. KKR's macro team describes its own capital allocation as favoring operational alpha over beta. The capability build predates and outsizes the messaging. The paradox LPs should sit with Dry powder is near record levels, global buyout funds have raised $1.8 trillion since 2022, while deal counts fall and holding periods stretch toward seven years, up from five to six years for most of 2010–2021. Distributions as a share of net asset value sit at roughly 14%, a level last seen during the 2008–09 crisis, for a fourth consecutive year. GPs are not short of capital or ideas; they are short of the one input, realized, organic EBITDA growth at scale, that multiple expansion used to make optional. The takeaway Multiple expansion did not disappear because sponsors got worse at buying companies. It disappeared because rates reset and multiples never came back down to meet them. Every point of that gap now has to be earned inside the business, not at the closing table. For LPs, that means underwriting the operating platform, not just the historical IRR. For GPs, it means the value-creation plan is the deal, not an appendix to it. --- # When an Exit Isn't Really an Exit *Exit activity has recovered, but distributions haven't. As private equity invents new ways to create liquidity, the industry's biggest challenge is no longer selling companies, it's returning cash to investors.* - URL: https://nexthorizoncapital.in/research/when-an-exit-isn-t-really-an-exit - Published: 24 July 2026 - Authors: Sandeep Menon, Nakul Goel - Category: Private Equity, Institutional Capital - Reading time: 4 minutes Summary: Global private equity exits surged in 2025, yet cash distributions to investors fell to their lowest level in decades. The industry's liquidity problem hasn't disappeared, it has simply evolved. Private equity appears to have turned a corner. Global buyout deal value rose 44% to $904 billion in 2025, while exit value climbed 47% to $717 billion, making it the industry's second-best year on record after 2021. On paper, the liquidity problem seems to be easing. [Figure: When an Exit Isn't Really an Exit ] Yet beneath the headline numbers lies a more uncomfortable reality. Cash is still not flowing back to investors the way it once did. Bain notes that distributions as a percentage of net asset value have remained below 15% for four consecutive years, the longest stretch on record. Meanwhile, private equity firms continue to hold roughly 32,000 unsold companies worth $3.8 trillion, as managers delay exits in the hope that stronger earnings or better market conditions justify higher valuations. That distinction matters because liquidity is not measured by transaction activity alone. It is measured by capital returning to limited partners. Private equity has become remarkably efficient at creating transactions. It has become far less efficient at generating distributions. This is where the industry's newest liquidity mechanisms come into focus. Continuation vehicles, GP-led secondaries, NAV lending and sponsor-to-sponsor transactions have all grown rapidly in recent years. Each solves a genuine problem. Each creates optionality for investors. But they also share something important: they often move assets within the private-markets ecosystem rather than transferring them into public ownership or strategic hands. The result is an industry increasingly capable of recycling ownership without necessarily expanding realised liquidity. Bain itself is careful not to overstate these tools. Continuation vehicles currently account for less than 10% of global exit value, providing flexibility for managers but representing only a partial answer to the industry's liquidity challenge. McKinsey reaches a remarkably similar conclusion. Although dealmaking returned forcefully in 2025, liquidity for investors remains "more a trickle than a flood." More than 16,000 buyout-backed companies have now been held for over four years, representing 52% of total buyout inventory, the highest level on record. Average holding periods exceed six and a half years, while secondaries, continuation vehicles and NAV lending have evolved from temporary responses into structural features of modern private equity. Perhaps the most telling statistic concerns distributions themselves. McKinsey estimates that DPI as a share of total private equity AUM fell to just 6% in the twelve months ending June 2025, compared with an average of 16% between 2015 and 2019. On a rolling five-year basis, cash returned to investors relative to industry assets reached its lowest level on record, even as secondaries trading volume expanded 48% during 2025. None of this means private equity is broken. Quite the opposite. The industry's innovation around liquidity has been extraordinary. Funds have developed increasingly sophisticated ways to extend ownership, accommodate investor preferences and avoid becoming hostage to frozen IPO markets. But innovation should not be mistaken for resolution. The industry's central challenge has not disappeared. It has changed shape. Last week we argued that the venture capital bottleneck moved upstream, from founders raising capital to fund managers raising it. Private equity is experiencing a similar evolution. The question is no longer whether firms can execute exits. It is whether those exits ultimately return enough cash to investors to finance the next generation of funds. --- # The Price of Liquidity *The shift towards liquid alternatives has changed the economics of generating alpha.* - URL: https://nexthorizoncapital.in/research/the-price-of-liquidity - Published: 18 July 2026 - Authors: Nakul Goel, Sandeep Menon, Hriday Chanda - Category: Alternate Investments - Reading time: 6 minutes Summary: The funding winter changed more than venture capital. As investors shifted towards liquid alternatives, the hurdle for generating alpha quietly became much higher. The real question is whether the price of liquidity will ultimately prove worthwhile. Last week, we argued that India's funding winter did not end when startup investment recovered. It simply moved upstream. Venture deployment found its footing in 2024, while fundraising remained under pressure, revealing that the constraint had shifted from founders seeking capital to fund managers seeking commitments. That naturally leaves another question. If capital became more selective about backing venture funds, where did it go instead? [Figure: Line chart comparing monthly returns of India's Category III long-short funds with the Nifty 50 TRI from February 2024 to September 2025. The chart shows Category III funds outperformed the index during most market drawdowns, with the highest monthly beat rate of 90% in July 2025 across 31 tracked funds. The observation covers 20 of 22 months and tracks between 30 and 35 funds.] The answer is visible in India's alternatives industry. By the end of 2025, cumulative commitments to Alternative Investment Funds had crossed ₹15 lakh crore+ Committed to India's AIF industry Within that expansion, Category III AIFs emerged as the fastest-growing segment, with commitments exceeding ₹3 lakh crore and growing materially faster than the rest of the industry. The migration is hardly surprising. After two years of delayed exits, frozen IPO markets and illiquid portfolios, investors began assigning a premium to flexibility. Daily NAVs became more attractive than decade-long lockups. Liquidity ceased to be merely a portfolio feature. It became an investment objective. Markets have always behaved this way. Every cycle changes what investors believe is scarce. After the global financial crisis, safety became paramount. Following the post-pandemic technology boom, profitability returned to favour. The correction of 2022 and 2023 produced a different instinct. Investors increasingly preferred assets they could value daily, redeem more frequently and explain more easily to investment committees. Capital followed those preferences. Whether superior liquidity translated into superior outcomes is a more difficult question. Unlike venture capital, Category III asks investors to clear a considerably higher hurdle before value is created. Management fees, performance fees, taxation in many structures and manager selection risk all sit between the investor and the underlying market return. The comparison is no longer against cash. It is against increasingly inexpensive passive exposure. That changes the economics of active management. A low-cost index fund begins every year only a few basis points behind the market. An actively managed Category III fund begins with a materially higher cost structure. Every percentage point of alpha must therefore be earned before excess return reaches the investor. Recent benchmark data illustrates that dispersion has become the defining feature of private capital. Some managers continue to generate exceptional outcomes. Many do not. McKinsey makes a similar observation globally. As private markets mature, excess returns are becoming less a product of favourable markets and increasingly a function of manager selection, operational execution and disciplined capital allocation. Alpha, in other words, is becoming harder earned rather than broadly available. The migration from venture capital towards more liquid strategies was understandable. Yet every investment cycle carries the risk of solving yesterday's problem at tomorrow's cost. Liquidity is valuable. So is optionality. Neither, however, is a substitute for long-term compounding. The history of capital markets is remarkably consistent on this point. Investors rarely buy what is objectively cheap. They buy what recently became emotionally scarce. Last week, we argued that the funding bottleneck had moved upstream. This week, the evidence suggests something equally interesting. Capital moved as well. It did not become more impatient. It became more selective about certainty. Whether that preference proves rewarding will depend less on the asset class than on whether the manager can overcome the increasingly expensive hurdle that certainty now demands. --- # India’s VC Market Is Deploying Faster Than It Is Raising *India’s venture deployment recovery is two years old. The harder question now sits upstream: can the GPs writing those checks still raise the next fund?* - URL: https://nexthorizoncapital.in/research/india-s-vc-market-is-deploying-faster-than-it-is-raising - Published: 8 July 2026 - Authors: Nakul Goel, Sandeep Menon - Category: Venture Capital - Reading time: 6 minutes Summary: Indian VC deployment has recovered from its 2023 trough, but the capital behind it has not recovered at the same pace. The emerging constraint in venture may no longer be whether founders can raise from GPs, but whether GPs can raise from LPs. Few narratives have aged this poorly. “Funding winter” has meant one thing for three years: founders can’t raise. The data increasingly says otherwise. [Figure: Indian VC deal value and fundraising from 2019 to 2025. Deal value recovered from $9.6B in 2023 to $16B in 2025, while fundraising recovered from $2.7B in 2024 to $5.4B in 2025.] Indian venture deal value bottomed at $9.6bn in 2023, down from $25.7bn the year before. By 2024 it had climbed back to $13.7bn. By 2025, roughly $16bn. The recovery in deployment is now two years old, even as the language surrounding the market has scarcely moved on from its trough. Fund-level fundraising moved on a different clock. Capital raised by India-focused VC and growth funds hit a record $8bn in 2022, then collapsed past the 2023 low, bottoming at $2.7bn in 2024, a full year after deal value had already turned. It clawed back to about $5.4bn in 2025. Deployment found its floor first. Fundraising followed a year later, and remains some distance from its previous peak. Here’s the part getting missed: deal count barely moved. 1,462 → 1,482 Indian VC deal count, 2023–24 The recovery in deal value didn’t come from more companies getting funded. It came from bigger checks going to fewer of them. Someone's going to point at that 2025 fundraising rebound (nearly double the 2024 number) and say the trust problem is over, GPs can raise again. That's a fair read of one year of data. It's also the wrong frame, because the more precise signal was never the aggregate fundraising number. It's where inside the system that capital is actually going. SEBI's Alternative Investment Fund data answers that question, and it's been building for a decade, not a year. Category I - the classification that houses India's registered venture capital funds, the vehicles a generation of LPs used to back a single manager's judgment for ten years, held 48% of total AIF commitments in FY14, and by September 2025, after total industry commitments had grown more than a hundredfold, it held just 6%. Category III, built for listed, liquid, hedge-fund-style strategies, moved the other way: under 13% two years ago, over 19% now. The decade-long change in the composition of India’s alternative capital pool is difficult to ignore. Capital has become more discriminating about where it sits, how long it stays there, and whose judgement it is prepared to underwrite. The shift extends well beyond India. UBS's family offices are cutting private equity from a 2023 peak of 22% toward a planned 18%, while private debt allocations double, 2% to 4%, on their way to 5%. McKinsey counts new PE firm formation falling roughly 18% a year since 2020. PitchBook found twelve firms took more than half of all global VC raised in the first half of 2025. ### Liquidity is not the bottleneck If liquidity were the problem, these numbers would look very different. Global secondaries volume reached a record $240bn in 2025, up 48% from $162bn the year before. Investors are trading existing exposure faster than ever, while new fund formation continues to slow. The bottleneck didn't disappear when dealmaking recovered. It moved upstream. In 2023, the central question was whether a founder could persuade a GP to finance the next five years. Increasingly, the harder question is whether that GP can persuade an LP to finance the next ten. ### The question 2026 has to answer What we don't know yet is whether 2025's fundraising rebound is the start of LPs re-committing to single-manager venture vehicles, or a one-year outlier inside a ten-year structural shift away from them. The SEBI numbers say structural. One good year in Bain's aggregate isn't enough evidence to say otherwise yet.