 "How do the rich grow their wealth? Survey reveals strategies used by HNIs")
A recent Wealth Index report by rating agency Crisil and wealth management firm 360 ONE Wealth reveals that a significant portion of High Net-Worth Individuals (HNIs) and Ultra High Net-Worth Individuals (UHNIs) in India are aiming for annual returns in the range of 12-15%, and that due to high equity valuations, the wealthy are diversifying beyond traditional assets such as Portfolio Management Services, Alternative Investment Funds and Real Estate Investment Trusts are gaining popularity.
The report, based on a survey of over 1,000 wealthy individuals across India, indicates that HNIs and UHNIs largely maintained a positive outlook on their portfolios, despite volatile markets. The respondents, representing a wide range of industries, are primarily focusing on generating returns from equities, mutual funds, and alternative investments.
About 77 per cent of respondents rely on professional wealth advisors, with UHNIs being the largest group seeking professional guidance.
While 82 per cent of wealthy individuals are either engaged in philanthropy or plan to in the next two years, UHNIs, especially those above 60, are more inclined towards charitable activities.
In a bid to avoid legal complications, 72 per cent of wealthy people believe that succession planning is critical. Among UHNIs, 86 per cent have started or completed their estate plans.
ESG investing is also gaining momentum, with 68 per cent of wealthy investors considering ESG principles as critical to their investment strategy, reflecting a growing focus on sustainability and responsible investing.
Women now make up a growing share of wealthy individuals, with more than 40 per cent aged between 51-60, favouring lower-risk, stable investment products while becoming increasingly engaged in wealth management decisions.
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The respondents were most comfortable with stocks, mutual funds, and fixed-income securities. They were less familiar with Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs) on account of them being newer investment avenues.
Key Findings
Return Expectations: A dominant 70% of HNIs and UHNIs expect returns between 12-15% annually.
Investment Strategy: Approximately 55% of respondents prefer equities due to their long-term capital appreciation potential. This is followed by fixed income and alternative investments, such as private equity and venture capital, which account for a significant portion of their portfolios.
Shift Towards Alternatives: Alternative assets such as real estate and cryptocurrencies are becoming more popular. Nearly 20% of wealthy investors are increasing their exposure to real estate, which remains a stable source of returns. Cryptocurrency investments have also seen an uptick, albeit cautiously, with many respondents diversifying small portions of their portfolios into digital assets.
Optimism in the Domestic Market: Investors are focusing more on domestic stocks, with sector-specific bets on technology, healthcare, and renewable energy.
What is success? 41 percent of the respondents define success as achieving positive returns in any market condition, while 37 percent were looking for outperformance of the indices.
Risk: More than 65 percent of HNIs and UHNIs prefer a more balanced investment style, while 22 percent were open to higher-risk investments with potential for higher returns.
Most loved: The share of equities in the portfolio was dominant, forming more than 39 percent (for both HNIs and UHNIs), followed by debt (20 percent), real estate (19 percent), gold and commodities (10 percent), etc. At least 48 per cent of HNIs and 36 per cent of UHNIs preferred to keep 10-15 percent in assets that can be easily liquidated in three to five days.
Investing overseas: Of those looking to invest abroad, more than 51 percent were inclined towards the US, followed by other Asian markets (15 percent) and the UK. Between HNIs and UHNIs, 50 percent of the UHNIs were open to investing abroad against 30 percent of HNIs.
Capital appreciation: 39 percent of UHNIs prioritise capital appreciation as their main investment goal, with 22 percent focusing on wealth preservation. On the other hand, HNIs were more focused on income generation (39 percent) followed by capital appreciation (32 percent). Most investors aged over 60 also lean towards capital appreciation as their primary goal, with wealth preservation and income generation next on the list.