India has one of the fastest-growing segments of ultra-high net worth individuals (UHNIs) in the world. Take this: As India’s per capita income crossed $2,000-mark in 2021, the number of millionaires in dollar terms stood at 7.65 lakh. To juxtapose this with China, the number of millionaires stood at 4.15 lakh in dollar terms in 2008 when China crossed a similar landmark. It has since grown to 52.79 lakh millionaires in 2020, according to the Global Wealth Report 2021.
So, how India’s growing super-rich individuals can invest their money going ahead? In an exclusive interaction with Business Today, Vikaas M Sachdeva, Managing Director, Sundaram Alternate Assets shared his insights on various assets classes along with the strategy which may help UHNIs to build their portfolio. Edited excerpts:
Business Today: How super-rich investors can build a corpus of Rs 5 crore in 2023?
Vikaas M Sachdeva: Ultra HNIs and family offices have a strong centre of gravity towards capital preservation and usually plan investments from a 5 to 7-year point of view. They would do well to stick to a portfolio of high-quality growth companies in the public markets, long-only equity space – either directly or through alternate asset managers who have a track record of at least 10 years in generating alpha. An allocation of 50 to 70 per cent would be ideal.
On the other hand, real estate investment entails larger ticket size than Rs 5 crore and is currently available in a variety of co-investing options like residential and commercial real estate, warehousing, data centres and the like. However, for relatively smaller sums of money, a private credit AIF (alternative investment funds) would be ideal. An allocation of 20 per cent would be perfect for this space. One of the contrarian bets to look at in 2023 could be gold and silver ETFs. The balance could be invested in such vehicles.
Business Today: How AIFs space has evolved over the years?
Vikaas M Sachdeva: UHNI segment is savvy with global trends and wants to partake of them meaningfully. The AIF space allows them to participate in trends like unlisted equity, private credit, hedge funds, real estate and a host of other options in each asset class.
AIFs give this set of investor access to innovation, a like-minded pool of investors and curate products focusing on emerging trends, among other benefits. As a result, commitment amounts in AIFs have increased exponentially over the last few years. CAT III AIF commitments, for example, have seen a 35 times growth in the last 7 years. This is from Rs 2,100 crore to close to Rs 75,000 crore at present, according to Sebi data.
Business Today: Can you throw some light on credit opportunity funds? How UHNIs can benefit from the same?
Vikaas M Sachdeva: As India fast tracks beyond being a $5 trillion economy, it needs to add around $2.5 trillion in credit to support this growth. This will not just result in more innovative structures across platforms being created, but will also bring to the fore co-investors from the family office and UHNI fraternity into such deals.
Already, real estate debt, emerging corporate credit, venture debt and other focused opportunities are starting to gain meaningful traction. To reference it globally, private credit forms 15 per cent of global private capital assets under management, according to the EY Private Credit market survey.
At Sundaram Alternates, we have already seen heightened interest and success in the launch of our High Yield Secured Real Estate Funds and Emerging Corporate Credit Fund over the last few years.
Business Today: What are the risks involved in credit opportunity funds?
Vikaas M Sachdeva: As in any investment avenue, one needs to be mindful of risks like credit risk, interest rate risk, liquidity risk and re-investment risk, among others.
Business Today: Coming to India's equity market which scaled a new all-time high in the first week of December, where are markets headed in 2023?
Vikaas M Sachdeva: We believe that the Nifty at 18-19 times one-year forward valuations, juxtaposed with other global markets at more attractive valuations, will remain range bound for better part of the year. However, investors are likely to be amply rewarded if their focus gets to be sector or stock specific over the next one year. Corporate earnings are expected to make a smart comeback as raw material prices edge down and demand picks up. Typically, this would be a fertile ground for high-quality growth strategies to outperform in the coming year.
Business Today: Where do you see the next set of leaders coming from over the next 12-36 months? Why?
Vikaas M Sachdeva: At a sectoral level, we prefer consumer discretionary -- especially urban-oriented names -- export themes like specialty chemicals as well as retail private banking names. Some specific sub-categories within the financials space which offer sizeable potential for growth like affordable housing, small business loans and vehicle loans are also looking interesting.
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