The total individual wealth in alternate assets including Alternate Investment Funds (AIFs) stood at Rs. 41,960 crore in FY15, growing by 77% from the previous financial year, shows Karvy Wealth Report 2015.
Alternate assets, which include venture capital funds, private equity funds, structured products & real estate funds, are commonly believed to have a low correlation with standard financial asset classes like stocks, bonds and cash.
Alternate funds are divided into three categories. Category one consists of social venture funds, infrastructure funds, venture capital funds and SME funds. Category two consists of private equity funds, debt funds and fund of funds. Hedge funds fall in the third category.
The largest wealth (Rs. 14,232 crore) is held in high yield debt category which includes instruments like mezzanine debt, non-convertible debentures and structured debt. Real estate NCD is the most popular high yield debt instrument among high net-worth individuals since most of them offer a regular coupon ranging from 18%-22%, states the report.
After high yield debt, the second largest individual wealth is held in structured products at Rs. 12,080 crore. The returns of structured products are linked to the performance of underlying assets such as equities or commodities. Investors can tweak their exposure to underlying assets depending on their risk profile. The minimum ticket size in such products is Rs. 25 lakh.
The third largest individual wealth is held in private equity funds at Rs. 6,255 crore. Private equity funds are gaining popularity among HNIs and UHNIs, which is evident by 18% growth in assets in this category, particularly in sectors like IT and ITeS, energy and natural resources, manufacturing, banking and financial services, telecom and pharmaceuticals. “The period of January 2015 to October 2015 saw almost 863 private equity deals worth $ 13.83 billion, a 38% rise from the corresponding period last year, states the report.
Composition of individual wealth in alternate assets
|
Asset Class |
Total individual estimation Rs. cr. |
Proportion (%) |
|
High Yield Debt |
14,232 |
33.92 |
|
Structured Products |
12,080 |
28.79 |
|
Private Equity |
6,255 |
14.91 |
|
Real Estate Fund |
3,622 |
8.63 |
|
Gold ETF |
3,439 |
8.2 |
|
Hedge Fund |
1,346 |
3.21 |
|
Film Fund |
679 |
1.62 |
|
Infra Fund |
215 |
0.51 |
|
Venture Capital Fund |
92 |
0.22 |
|
Total |
41,960 |
100 |
|
Source: Karvy Wealth Report 2015 |
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The report says that alternate funds are at a very nascent stage in India and there is huge scope for growth in this asset class.
