 "The billionaires' alchemist")
PRATEEK PANT
Director-product and services, RBS Private Banking
One of our most savvy investors sold off his fixed-income portfolio at the peak of the interest rate cycle even though he was in the red, and ploughed that back into cash funds, which are short-term funds.
Real estate: While real estate has always been a preferred investment avenue for HNI clients, there was a shift from residential assets and land for capital appreciation to pre-tenanted commercial properties, warehouses, schools and hospitals. Here, the yield is able to provide a hedge against inflation and capital appreciation can play out over a longer time horizon.
A number of clients with land holdings have also been evaluating the possibility of setting up joint ventures for the development of residential or commercial properties.
Equity investment and global equity: At the beginning of last year, equity portfolios were skewed towards cyclical sectors and mid-caps with the hopes of risk on environment. However, market momentum was firmly in favour of going large and defensive, and hence portfolio strategies were re-calibrated to reflect this bias.
Furthermore, taking into consideration the elevated currency volatility in the second half of last year, we had suggested investors diversify their equity allocations into global equities.
Global funds, in particular those that were focused on US markets investments, saw significant interest last year. The returns some of these markets were able to offer, when the weakness in the rupee is taken into consideration, have proven to be attractive options. Some of our clients in the technology and retail domain continue to invest in start-up ventures, however, mature businesses are conserving cash at this juncture.
Succession planning: A Bangalore-based client, who runs a multi-billion-rupee IT solutions company, was worried about his wealth affecting the ambition and drive of his children who were mostly educated abroad. To address this concern around inter-generational wealth transfer, wealth planners assisted him in formulating a strategy for long lasting and constructive legacy.
SAMEER KAUL
Head, Citi Private Bank
Losses due to interest rate spikes: Since the view on interest rates was bullish, many clients who invested in duration funds early on suffered losses as interest rates saw a sudden spike. As a result, many clients are even today sitting on market-to-market losses. But thankfully, many of them have the appetite to stomach these losses.
When the 10-year government security bonds touched 9 per cent, we got calls from high net worth individuals (HNIs) asking if they should switch to duration funds (long-term funds). But given the uncertainty over rates, we were not sure if this was a good time to recommend duration calls.
Investment in other businesses: Broadly the investment of billionaires can be classified into three categories. First, those who invest in their own businesses. Second, those who put money in other businesses largely as investors. A third category of billionaires create liquidity outside of their core businesses and invest in public markets, including in real estate
While investing in their own businesses is understandable, many billionaires also have locked on to fixed returns by investing in other businesses. The returns here are sometimes better than returns from capital markets. Such investments not only provide diversification but also opportunity in terms of higher returns than from traditional fixed- income products.
Current concerns: HNI clients are currently more concerned about preservation in terms of capital rather than growth. Since there has been a spike in short-term yields towards the end of the year, our advice to them is to invest in short-term fixed income instruments such as Fixed Maturity Plans and tax-free bonds. The focus always should be on asset allocation; there should be a regular review of the portfolio to take stock of how the investments are faring. Given that a risk-free rate is reasonably high, good advice would warrant clients beating the risk-free rate on a risk-adjusted basis.
SATYA NARAYAN BANSAL
Chief executive-India, wealth and investment management, Barclays
Mostly, entrepreneurs who are not yet mature don't think of investing outside their own business. But those who have mature businesses often want to diversify. So, they invest in other businesses.
Some do it on their own, while some prefer to invest through a private equity fund. This gives them confidence about the soundness of their investment. Some of the sectors that are gaining popularity among billionaire investors are renewable energy, agro and agro-related technology, FMCG and health care.
In some cases, billionaires are sector agnostic and pick up stake in stressed assets that are being sold by banks or non-banking finance companies or assets that are being vacated where PE funds or Venture Capital funds. Here the thought is that this is a right business available at the right time.
Managing liquidity: Not just investment, but many businesses also need help with managing liquidity. This was the case especially last year, and many businesses were in consolidation mode. In many cases, businesses borrowed against their existing assets or sought core investment through a Special Purpose Vehicle.
Real estate: Most billionaires are overexposed to real estate. This has its pros and cons. Land is inflation proof, but highly illiquid. Many are realigning their real estate investment. Many families tilt towards real estate because they do not feel positive about equity. But now they are more inclined towards debt funds because of the good returns these have given.
Director-product and services, RBS Private Banking
One of our most savvy investors sold off his fixed-income portfolio at the peak of the interest rate cycle even though he was in the red, and ploughed that back into cash funds, which are short-term funds.
Real estate: While real estate has always been a preferred investment avenue for HNI clients, there was a shift from residential assets and land for capital appreciation to pre-tenanted commercial properties, warehouses, schools and hospitals. Here, the yield is able to provide a hedge against inflation and capital appreciation can play out over a longer time horizon.
A number of clients with land holdings have also been evaluating the possibility of setting up joint ventures for the development of residential or commercial properties.
Equity investment and global equity: At the beginning of last year, equity portfolios were skewed towards cyclical sectors and mid-caps with the hopes of risk on environment. However, market momentum was firmly in favour of going large and defensive, and hence portfolio strategies were re-calibrated to reflect this bias.
Furthermore, taking into consideration the elevated currency volatility in the second half of last year, we had suggested investors diversify their equity allocations into global equities.
Global funds, in particular those that were focused on US markets investments, saw significant interest last year. The returns some of these markets were able to offer, when the weakness in the rupee is taken into consideration, have proven to be attractive options. Some of our clients in the technology and retail domain continue to invest in start-up ventures, however, mature businesses are conserving cash at this juncture.
Succession planning: A Bangalore-based client, who runs a multi-billion-rupee IT solutions company, was worried about his wealth affecting the ambition and drive of his children who were mostly educated abroad. To address this concern around inter-generational wealth transfer, wealth planners assisted him in formulating a strategy for long lasting and constructive legacy.
SAMEER KAUL
Head, Citi Private Bank
Losses due to interest rate spikes: Since the view on interest rates was bullish, many clients who invested in duration funds early on suffered losses as interest rates saw a sudden spike. As a result, many clients are even today sitting on market-to-market losses. But thankfully, many of them have the appetite to stomach these losses.
When the 10-year government security bonds touched 9 per cent, we got calls from high net worth individuals (HNIs) asking if they should switch to duration funds (long-term funds). But given the uncertainty over rates, we were not sure if this was a good time to recommend duration calls.
Investment in other businesses: Broadly the investment of billionaires can be classified into three categories. First, those who invest in their own businesses. Second, those who put money in other businesses largely as investors. A third category of billionaires create liquidity outside of their core businesses and invest in public markets, including in real estate
While investing in their own businesses is understandable, many billionaires also have locked on to fixed returns by investing in other businesses. The returns here are sometimes better than returns from capital markets. Such investments not only provide diversification but also opportunity in terms of higher returns than from traditional fixed- income products.
Current concerns: HNI clients are currently more concerned about preservation in terms of capital rather than growth. Since there has been a spike in short-term yields towards the end of the year, our advice to them is to invest in short-term fixed income instruments such as Fixed Maturity Plans and tax-free bonds. The focus always should be on asset allocation; there should be a regular review of the portfolio to take stock of how the investments are faring. Given that a risk-free rate is reasonably high, good advice would warrant clients beating the risk-free rate on a risk-adjusted basis.
SATYA NARAYAN BANSAL
Chief executive-India, wealth and investment management, Barclays
Mostly, entrepreneurs who are not yet mature don't think of investing outside their own business. But those who have mature businesses often want to diversify. So, they invest in other businesses.
Some do it on their own, while some prefer to invest through a private equity fund. This gives them confidence about the soundness of their investment. Some of the sectors that are gaining popularity among billionaire investors are renewable energy, agro and agro-related technology, FMCG and health care.
In some cases, billionaires are sector agnostic and pick up stake in stressed assets that are being sold by banks or non-banking finance companies or assets that are being vacated where PE funds or Venture Capital funds. Here the thought is that this is a right business available at the right time.
Managing liquidity: Not just investment, but many businesses also need help with managing liquidity. This was the case especially last year, and many businesses were in consolidation mode. In many cases, businesses borrowed against their existing assets or sought core investment through a Special Purpose Vehicle.
Real estate: Most billionaires are overexposed to real estate. This has its pros and cons. Land is inflation proof, but highly illiquid. Many are realigning their real estate investment. Many families tilt towards real estate because they do not feel positive about equity. But now they are more inclined towards debt funds because of the good returns these have given.