Where are high net worth individuals (HNI) and Ultra HNI investing in India?

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Investors are interested in private markets since a lot of the paper wealth is getting created amongst early and mid stage companies.

The stock market is booming and the real estate sector is showing signs of a big comeback. Gold prices have not moved much over the last 12-18 months and the dynamism in the interest rate movement is throwing up opportunities for investors. Wealth creation is a long-term process and making use of the opportunities along with the right asset allocation holds the key in generating a high inflation-adjusted return in one’s portfolio. And, the high net worth individuals (HNIs) and the ultra HNIs are looked upon as that set of investor community who play their cards well. To know how HNIs are allocating their funds, Sameer Kaul, MD & CEO, TrustPlutus Wealth ( India) in an e-mail interview shares the insights that may help retail investors in their investing decisions.

Of the several investment options available, where are the HNIs and Ultra HNIs investing in India?

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Many new investment options have been added over the years for HNI investors in India, outside of vanilla mutual funds and stocks. For instance, HNIs can now invest in Sovereign Gold Bonds/Gold ETFs, they can take exposure to real estate through Real Estate Investment Trusts (REITs) or real estate linked debentures, InvITs are an attractive vehicle to invest in infrastructure assets and Liberalized Remittance Scheme (LRS) and rupee denominated fund of funds are an attractive way to diversify the portfolio. Last but not the least, ideas such as pre-ipo investments, venture debt, private equity and hedge funds are also finding takers from within the HNI community.

The Nifty50 is up by over 10000 since the March 2020 lows. Have HNI and Ultra HNI remained invested at all levels or kept booking profits at crucial levels?

Our experience is that most of the investors have remained invested at all levels. Those who required liquidity at any stage or were unsure of the valuations have been booking profits. HNIs and UHNIs have been generating liquidity in their businesses and have been looking for opportunities across asset classes. We are seeing increasing interest in fixed income portfolios and clients are also looking at alternative investments.

Cryptocurrencies are still not a regulated financial product in India. What is the approach of HNI, Ultra HNIs while considering crypto as an alternative asset class?

We do not cover this asset class and would not like to comment on the same.

How attractive is the start-up space for HNIs in India? Is the money flowing more into tech start-ups or also into other sectors?

Investors are interested in private markets since a lot of the paper wealth is getting created amongst early/mid stage companies. Investors are able to access such companies either through the venture debt route or through venture capital/private equity funds. As with public markets, businesses that are privately held but have good unit economics are worth investing into and we do selectively suggest investors to consider such opportunities. However, in general we feel that there is greater exuberance in private markets as compared to public markets and investors must do thorough due diligence before investing into such an asset class.

How should HNIs approach asset allocation when it comes to investing their money?

UHNIs and HNIs should continue to stick to being disciplined in their investments by adhering to their long term asset allocation and rebalancing their portfolio periodically so as to ensure that they are not over exposed to a particular asset class. Of late, we have also seen an increasing appetite among HNIs for investments in exotic asset classes. Investments into so-called exotic asset classes such as private equity can be pursued subject to setting a cap in the overall asset allocation so that the long duration nature of such products and the lack of liquidity does not create challenges for the investor in terms of their overall investment objectives.

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