Wealth management is one of the key focus areas of financial planning for every investor. There are many wealth management firms in India today that focus on providing their services to diverse categories of investors, HNIs being one of the most sought-after ones among them. Discussed here are a few key strategies for efficient wealth management for HNIs and top investment options that may suit them better.
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Alternative Investment Funds (AIFs) are a type of investment fund that invests in assets that are beyond traditional asset classes such as equity and debt Example of AIF are private equity, venture capital, real estate, infrastructure, hedge funds, and debt funds which have potential to give a better return than the market. These funds are registered with SEBI and are popular among the HNIs, QIBs, institutional investors, etc. Investing in AIFs offers great diversification benefits alongside the potential for higher returns. These are also professionally managed assets and offer a huge deal of customization of assets making it a more convenient option for the HNI’s
PMS or Portfolio Management Services are another attractive investment option for HNIs as they provide customized or tailored investment solutions to this investor class and are managed by professional portfolio managers and has the potential to generate better return than the market. PMS are tailored to meet individual parameters like risk appetite, returns expectations, investment objective, and time frame.
Market-linked debentures (MLDs) are a type of debt instrument that is linked to the performance of a specific underlying asset or basket of assets, such as equity indices, currencies, or commodities. The returns from these investments, therefore, are based on the performance of the underlying assets and can be structured to meet requirements like capital protection. MLDs are typically issued by NBFCs and are issued with a fixed maturity period. While MLDs provide the benefits of diversification and the potential for higher returns they are also equipped with various risks like credit risk, liquidity risks, and more. However, investment into MLDs should be well thought about, especially after the tax changes proposed in Union Budget 2023.
HNIs can take note of pre-IPO stocks, otherwise known as unlisted shares, as an attractive investment option. These shares are not traded on the stock exchange and are often bought and sold through the Over-the-Counter market (OTC). Investing in unlisted shares allows investors to gain early access to new-age organizations with a focus on technology, innovation, and unique business concepts. Additionally, HNIs/investors can purchase the desired amount of shares based on their investment capacity, which may not be possible during an IPO due to oversubscription causing lower allocations. With an abundance of successful IPOs in 2021, the potential wealth gains from unlisted shares are worth checking out.
Investing directly in equities is another strategy available for HNIs. It could be investing in the Indian bourses or in international markets. While there is enough information on how you could invest in Indian stocks, investing in international markets is a new avenue that HNIs could consider exploring.
Indian HNIs seeking geographical diversification and a hedge against rupee depreciation can look like investing in international stocks. With a lower correlation to Indian markets and access to a broader range of investment options, international investments are becoming an attractive option for HNIs looking to manage risk and portfolio volatility. Some of the options available include investing through feeder funds or direct investments in stocks, bonds, and structured products. Additionally, for HNIs seeking to establish a financial base in another country, international investments present a compelling opportunity.
Dividends from both domestic and international equity investments could also form a part of passive income for HNIs.
ETFs and index funds are other lucrative investment options available to HNIs. These funds are low-cost passive funds that have relatively lower risks and the potential for higher returns based on the performance of the benchmark index. These funds also offer the benefits of diversification and are often a safer investment option than actively managed funds.
Real estate investments have long been the favorites of Indians, but they have been laced with obstacles due to high ticket sizes and limited liquidity. Fortunately, new investment options such as REITs and InvITs now enable investors to participate in these markets with lower financial commitments and increased liquidity. The Securities and Exchange Board of India (SEBI) has recently reduced the minimum investment value for REITs and InvITs, making them more accessible with a required minimum investment of only INR 10,000 and INR 15,000, respectively.
The benefits of investing in REITs and InvITs are two-fold: they offer a diversified asset class allows with intermittent income streams that can help meet financial goals. Furthermore, REITs & INvITs are required to distribute 90% of their earnings to unit holders, providing consistent returns. Similarly, this approach is attractive to organizations seeking to monetize real estate or infrastructure assets and can ensure a win-win outcome for both investors and issuers.
Sovereign gold bonds are the bonds issued by the RBI on behalf of the Central government of the country. These bonds are denominated in grams of gold, and the investment is made in Indian rupees. These bonds are considered a better option than investing in physical gold as they eliminate the limitations of the latter.
Investors get interest on their investments at the rate of 2.5% annually. Investors also get tax benefits in the form of exemption from capital gains tax if the bonds are held till maturity (8 years). The minimum investment allowed in Sovereign Gold Bonds (SGBs) is one gram of gold, and the maximum investment limit for individual investors is 4 kgs per financial year. The maximum investment limit for Hindu Undivided Family (HUF) and other eligible entities is 20 kgs per financial year.
HNIs are a diverse investor category that can invest in different asset classes and make the most of their wealth created over the years. There are dedicated wealth management firms and teams that provide investment advise and support at every stage of investment and create an investment plan that meets the individual needs of the HNIs. such professional advice can further help in not only increasing wealth but safeguarding it in the first place.
HNIs can use the Fisdom Private Wealth management services to get optimum and unbiased investment advice using the expertise of professional wealth managers backed by the latest technology. HNIs can also get 365-day access to their private wealth managers and a consolidated view of their investment portfolio at competent prices.
In India, HNIs are investors are typically defined as individuals with a high net worth and investible funds of at least Rs 5 crore or more.
The minimum investment amount in AIFs is Rs 1 crore.
Yes. Investing in liquid assets is important for every investor. Liquid assets allow the investors to exit the investment whenever needed and utilise the funds for better investment opportunities or meet any personal financial obligation that may arise from time to time
Portfolio review is an essential part of managing investments. This exercise helps in understanding the relevance of the existing investments with respect to individual risk-return parameters and weeding out those that no longer serve the purpose of investments.
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