Satya Bansal, chief executive officer of Barclays Wealth, tells Tania Kishore Jaleel that last year, when markets were doing badly, there was no dearth of opportunity in the debt space
Since equities were doing badly last year, did it give rise to new ideas?
Last year, when the equity market was in doldrums, there was enough opportunity in the debt space. There are enough ideas where clients can co-invest in businesses and so on. The ideas are not just in financial markets but investment ideas in businesses which allow them to see a whole range of solutions.
Asset classes have not gotten innovative, but investment strategies have gotten innovative. For example in the debt space, you can operate differently. You can play on duration, you can play on yields, arbitrage, G-Secs versus corporate bonds and so on. We can see these anomalies and see how to execute the best possible investment idea in that anomaly at that point in time. Innovation usually happens around the way you invest in that cycle of the market.
For e.g. debt can be operated differently. You can play on duration, you can play on yields, arbitrage Gsec vs Corp bonds and so on. We see these anomalies and execute the best possible investment ideas in that anomaly at that point in time. The innovation largely happens around the way you invest in that cycle of market. Only innovation is to go for hybrid. You can still play each of these asset classes. We are focused on getting the spotlight on anomalies that the market is offering in the best possible tax efficient manner.
The number of wealth managers has been increasing very quickly. How do you see the space?
Wealth management is very loosely defined and loosely operated with different business models. However we focus on high networth and ultra high networth individuals and a large part of our clients are from top end and midmarket business families. They have views across markets, credit and are interested in putting the right structure for continuation of their businesses.
We operate in all three spectrums. Our business model is like that of a private investment bank. For these clients, since the business is family owned, the personal and business wealth tends to overlap. So they essentially look for solution that encompasses their entire business cycle and business growth right from the surplus situation to investment ideas to liquidity for both business and family needs to also to put a structure for the next generation to take over. We do not compete with most players who are in the product distribution space, where they carry a product specific target. We do not have that approach.
How has Barclays Wealth been doing?
We have grown at a compounded rate of upwards of 35% in the last two years. Our business is growing at above industry rates, which is between 18-20%. This has mainly to do with the clients that we handle and the kind of relationship that we have with them which gives us enough opportunities to work with them.
Succession planning, multi-family businesses are services that are being talked about quite often. Are a lot of Indian corporates using this route?
At Barclays Wealth, we have been involved with a large number of families in implementing structures which help achieve long term succession planning objectives of these families.
This exercise is done at the promoter family level rather than at a corporate level and involves expertise ranging from understanding family dynamics, risks to business and personal wealth to understanding the legal and tax implications of implementing a structure. Our strong local presence coupled with vast global experience in this area has been instrumental in us having a leadership position in this space today.
Stocks markets have rallied this year. Are you surprised?
The rally was expected but what was not expected was the pace. There are three factors that are leading the rally right now. Towards the end of last year, there was a good amount of negative news flow right from the fiscal front to the monetary tightening from the Reserve Bank of India, the current account deficit, policy issues from a Government perspective to the situation in Europe, the general slowdown in the global economy and foreign investors not putting in fresh money. The negative factors have been factored in by the markets. And things cannot get any worse from here on. And it should be a positive surprise as and when things do change.
From the interest rate front, there are signals of them being relaxed soon. We will start seeing a downward movement in rates soon. It will definitely happen in the next three months. The larger issue, though, which needs to be factored in, is the fiscal situation and the Budget in that matter will be very important this year, as we are not expected to meet our fiscal target. It is going to be critical not from a regular perspective but from a guidance perspective. Even if nothing is announced, the markets will take it as a positive.
Secondly, the recovery in the US economy is gaining more credibility. The recovery there should act as a counter-balance to what is happening in Europe.
We are trading at a premium to the other emerging markets. Is this justified?
The composition of our market valuation basket has always been slightly different from other emerging markets. Markets such as Russia, South Africa, Brazil and so on are significantly driven by commodities. Our valuations comprises mainly of the services sector such as IT and financials. We still have a good vibrancy in our services sector. The kind of premium that we are attracting is definitely justified. And we should continue to attract a premium valuation even above the developed world.
