Top foreign wealth management firms are offering co-investment opportunities to India’s super-rich in their global private equity, real estate and hedge funds, or even structured products.
Co-investment is a strategy under which the private banks invest their own capital along-side their clients’ investment. Though a popular offering internationally, some leading private banks have just started offering this service in India to high net-worth individuals (HNIs).
For example, Macquarie has recently started offering the opportunity to invest in its global infrastructure and real estate funds and even projects through Religare Macquarie Private Wealth, providing Indian HNIs access to funds and deals that are usually available only for large institutions.
Morgan Stanley recently announced a private investment club with a minimum ticket size of $1 billion. Members of the club will get preferred access to deals that Morgan Stanley will be doing. They will also get to co-invest with Morgan Stanley in deals as well as participate as limited partners in its global funds.
Citi Private Bank invests its own capital along-side the client’s investment. It has funds such as Citigroup Property Investors Capital Partners Asia Pacific, a $800-million fund that provides its clients access to real estate investment opportunities across Asia and Capital and Real Estate Development Fund, a $400-million fund for HNIs looking at real estate investment opportunities in China.
Clients like such co-investment because the bank conducts the due diligence, thoroughly profiling the opportunity in terms of risk, potential returns and other legal and regulatory issues.
While Barclays Wealth does not solicit investments for specific funds, it does invite select HNIs to invest in deals that its investment bank comes up with. “Some large HNIs, who are like semi-institutions, want those kind of deals and we have shown it to some of our clients in India. The minimum threshold for investing in those deals is $ 5-10 million”, said Satya Narayan Bansal, CEO, Barclays Wealth.
Experts said these offerings have been catalysed by the $200,000 window opened by the Reserve Bank of India for every individual under the liberalised remittance scheme. Currently, overseas investments by HNIs are limited to US stocks and real estate. With Indian markets outperforming major global indices, HNIs have been focusing on local equities.
Vikas Agnihotri, CEO Religare Macquarie Private Wealth said, “It falls within the alternate asset class. What attracts many investors here is that there is minimal co-relation to equity markets. It is not mere funds where these HNIs would get to invest, there are a lot of infrastructure projects in which Macquarie invests. Based on the risk profile of the investor, Macquarie then selects a particular deal or fund for him. It makes sense for investors because there is a commitment on the part of the private bank as well, so the risk is shared.”
Private bankers said these co-investment deals fetch returns of 12 to 15 per cent on an aggregate portfolio basis. “The product is meant for moderate to aggressive investors. The fact that there is a regularity of revenues and monopoly in nature of assets makes it all the more attractive,” Agnihotri added.
Anuratna Chaddha, Managing Director & Head, Citi Private Bank India, said given the nature and investment size of the portfolios of Citi Private Bank’s clients, the bank’s approach was that of a private investment bank. “Since many of our mega-wealth clientele, especially the more entrepreneurial ones, are looking for access to deal flows, co-investment, as well as other capital market opportunities originated by the investment bank are an area of great demand. For the bank, it is like betting on your own advice or, metaphorically, putting our money where our mouth is.”
