A simple mutual fund may not work for HNIs. HNIs need complex financial products such as alternative investments, structured products and artwork to meet their expectations.
Cafemutual spoke to a few wealth managers who deal with HNI and ultra HNI clients. Here is what they have to say.
Anupam Guha, Head - Private Wealth Management, ICICI Securities feels that the appetite for hedge funds has increased among HNIs. He says, “We are witnessing a lot of traction in Category III or hedge funds as investors see huge opportunity in this space. Many HNIs believe that hedge funds can bring diversification to their portfolio along with a level of safety.”
On allocation, he said that his firm recommends HNIs to invest up to 15% of their corpus in AIFs. “AIF continues to be a small portion of the portfolio. We recommend allocation between 5 and 15% to AIFs depending on the life stage of client, risk appetite and so on.”
Seconding Guha’s view, Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital said, “We mainly focus on hedge funds of AIFs, which use complex investment strategies. We also recommend our ultra HNI clients and their families to invest in overseas funds, as they can invest up to USD 1 million every year. In the recent past, these instruments have delivered returns between 13-18% per annum after considering the rupee depreciation.
However, a few wealth managers have a different view. An owner of a Mumbai-based boutique firm said that he recommends his clients to invest in venture capital funds, private equity funds and real estate funds. “These funds can deliver superior returns over a long term with less volatility.”
Commenting on the growth of AIFs, he said, “Initially, the industry witnessed inflows only from institutions; however, the industry has been witnessing participation of HNIs in these instruments. AIFs became popular after the launch of a few IPO and pre-IPO focussed funds.”
