It is not just retail investors who put their hard earned money in mutual funds, HNIs too prefer investment funds which include mutual funds and ETFs over direct equities, AIFs, property and primary business.
The recent IIFL Wealth-Wealth X report says that HNIs reckon the best place to book returns right now is investment funds, followed by equities and fixed income. Investment funds make up one third of the total assets held by the super wealthy and 84% of HNIs hold at least some of their fortune in these funds. Interestingly, one in five HNIs holds over half their wealth in investment funds.
In addition, 48% of HNIs want to increase their exposure to mutual funds over the next one year, says the report.
However, investment funds may not be very popular among ultra HNIs. “These pooled investments tend to be more popular with HNIs than very HNIs and Ultra HNIs who are more likely hold at least half of their wealth in their own business. One in five of ultra HNIs holds over 50% of their wealth in their own business. That may be because they are still in the process of building their companies.”
The report defines HNIs individuals as those with a net worth between Rs.65 million and Rs. 650million, Very HNIs with a net worth between Rs.650 million and Rs. 2billion and ultra HNIs with a net worth of Rs.2 billion and above.
Direct equity, cash and fixed income followed investment funds and primary businesses. In terms of wealth allocation, the report shows as 16% of wealth is held in equities and 13% in fixed income. Cash deposits account for 6%.
The report found that gold has lost its sheen with just 2% of assets invested in gold.
Until recently, property has been the investment of choice with half of the wealthy putting their money in real estate. Investment properties represent 10% of their asset base. However, this might be excessive and needs o rebalancing. “Twenty-eight percent of India’s richest individuals see property as over-represented in their portfolios. Until now they have viewed property as beneļ¬cial on two fronts: diversiļ¬cation and solid returns. But as these wealthy investors seek better returns, equities and direct investment in businesses other than their own appear to offer better opportunities,” said the report.
