Features like transparency, track record, clear tax structure and strategic fund allocation can attract investments in Alternative Investment (AI) funds.
Delegates from alternative investment,
mutual fund, private wealth management, banks congregated at the Alternative
Investment Summit 2013 held in Mumbai. The event was organized by Association of International Wealth
Management of India (AIWMI). As claimed by AIWMI CEO, Aditya Gadge, the total turnout at the event was close to 240.
In a panel discussion moderated by Arpita Vinay, Senior VP, Centrum Wealth Management on ‘Reviewing the market landscape for alternative investments in India’, industry experts like Andrew Holland, CEO Ambit Investment Advisors, Karan Bhagat, IIFL Private Wealth Management, Navneet Munot, CIO, SBI MF and Manish Makharia, Executive Director, TVS Capital Funds emphasized the need to standardize structure of alternative investments (AI) on the lines of mutual funds so that people could easily understand its importance.
Structure: Bhagat suggested, “Like mutual funds, AI funds should start providing track records, details of asset allocations and fund performance on monthly or quarterly basis in public domain. It will help investors to compare and choose among AI funds. Also, it will increase awareness about AI funds.”
Munot and Holland stressed the need to increase transparency in fund management in order to attract institutional participation in AI.
According to Holland, AI industry needs a better information systems in place through which people could get access to all the information and developments taking place at AI.
Asset allocation: Makharia believes that investors should invest up to 10% of total investible corpus in alternative assets since these instruments are illiquid and not suitable for investors with short investment horizon, he added.
However, Bhagat said that investors can allocate around 20-30% in alternate investment funds as they have the potential to fetch higher returns over a long term. According to him, 60% of total investible corpus should be invested to gain relative returns, 10-15% for absolute returns and rest of assets (around 20-30%) for substantial returns through AIF.
Taxation: The panel agreed that taxation is always a cause of concern in AIF since there are a lot of grey areas. They stressed the need to put a clear tax structure in place like mutual funds so that distributors and investors would not have ambiguity in mind. Holland feels that inflows in alternative assets can be increased with clarity in tax structure.
Active management: Makharia and Munot were of the view that well managed alternate investment funds have the potential to deliver attractive returns. Fund managers need to adopt a strategic allocation which spread across diversified asset classes of AI. However, such strategy would be illiquid but AI funds have to assure investors that they would provide better returns to its investors in the long term. Also, the long term nature of AI gives an opportunity to fund managers to showcase their skills and maintain a good track record, they added.
Responsibility of Advisers: The panel recommended financial advisers to target clients who have investment horizon of at least 10 to 15 years. Also, the onus of spreading awareness about AI is on advisers, the panel said.
