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Alternative Investment

‘New-gen is more adventurous with riskier investment’

Do you know where are some of the wealthiest families of India investing their family wealth? 

While traditional businesses and real estate continue to be popular, a new trend is emerging as an increasing number of young scions of these families get actively involved in managing and investing family wealth through the many family offices in the country.

Simply put, a family office is a private company that manages the investments of a wealthy family. For instance, Azim Premji’s Premji Invest, Narayana Murthy’s Catamaran, Harsh Mariwala’s Sharrp Ventures, Patni Family Office, Burman Family Holdings or the Chona Family Office of the founders of Havmor ice cream. 

According to Soumya Rajan, Founder & CEO, Waterfield Advisors, which is one of the largest multi-family office firms of India, alternative investments in private markets, global diversification in the form of investing internationally across asset classes, geographies, currencies & commodities along with sustainability are some of the key trends witnessed in the family office arena. 

“The new-gen is more adventurous with riskier investment such as investing in seed-stage startups, unlisted companies, newbie venture funds and greenfield real estate projects,” she says. 

Rajan further tells Business Today that there has been a global proliferation of family offices as an increasing number of business families are finding such structures an ideal vehicle to invest their family wealth. 

Excerpts: 

What are the 2-3 key trends that you are seeing in the family office space in terms of investing avenues/instruments? 

Alternatives: Compelled by innovative technologies, digitisation and new business models, family offices are turning their interest to alternative investing. At Waterfield we define alternative investments as investments in private markets covering both debt and private equity. When I started Waterfield, the average asset allocation in the alternatives asset class was less than 3%. Today we are seeing this allocation in the range of 10-15% of the overall portfolio and it is only increasing. 

Separately Managed Accounts: Additionally, in the alternatives space, we are also seeing a growing interest from clients in having a Separately Managed Account (SMA) that can be created for their specific alternate strategies. It is a bespoke solution that efficiently deploys large pools of capital into customised strategies that allows for greater control on investment and divestment decisions and can lower the cost of investing. 

Global Investments: Family offices are looking to diversify their portfolios internationally across asset classes, geographies, currencies and commodities. We have seen this happen through both rupee-denominated products as well as through increased remittances through the LRS window. 

Wealth with a Purpose: This is being driven by the NextGen in family businesses for whom climate and sustainability issues are a top priority. With increasing wealth inequality, we are also seeing an increased social consciousness to give back to those less privileged. 

Does creating a family office help in investing family wealth in a better way? 

With many aspects of their long-term planning tied to their investment portfolios, most families find that family offices represent the ideal structure for implementing a cohesive wealth management strategy. Where a family’s financial needs are complicated, a family office provides an integrated service model that accounts for everything financial in one place. The oversight that a family office can provide greatly reduces omissions created by individual financial silos. 

Do family offices invest in related sectors of their businesses or are open to new sectors as well? 

For family offices the interest in alternatives is huge. While family offices are looking for exponential returns, they are looking for how to give back to the entrepreneurial ecosystem because they themselves have been entrepreneurs in the past. For instance, if the family’s business is primarily in healthcare, their family office is looking at investing in diagnostics, wearables, robotics assisted surgery. etc. It is an extension of their core competence. They are looking at how they can mentor, how they can share their experience and also earn great returns. Some of the large family-owned capital pools are now managed by young scions of rich business families. The new-gen is more adventurous with riskier investments such as investing in seed-stage start-ups, unlisted companies, newbie venture funds and greenfield real estate projects.

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