‘HNIs want to diversify, create offshore portfolio’
The steady rise in global equity markets over the years has been a big draw for investors. SAMEER KAUL, managing director and head of Citi Private Bank, India, tells Puneet-Wadhwa that there is a significant increase in the number of families who wish to diversify their portfolios. Some families have children studying abroad and are considering purchasing property there, he says. Edited excerpts:
Every bank and brokerage has a private banking proposition. What differentiates your firm?
Our bankers focus on clients’ individual needs and offer a suite of mutual funds, fixed income, structured products and alternative investments. We do not manufacture our own products in India, so clients see value in the open architecture that we provide. Investors can also take advantage of the LRS (liberalised remittance scheme) route.
Over the past few years, avenues such as art and wine have emerged as investment options. Are the well-heeled in India looking at them?
Art as an asset class in India is still nascent and while it is not as prevalent like in the US and European markets, it is growing. Investment in art is a longterm play and relies on the discretion of the individual. We have an Art Finance program outside India, where we provide a line of credit against approved art work to help create liquidity for clients.
How are investors hedging their investments?
Our clients are largely onshore and are not affected by the movement in the Indian currency in terms of their onshore portfolio. Currency depreciation increases the interest level of clients to build an offshore investment portfolio through the LRS route. We are seeing a significant increase in the number of families that wish to diversify their portfolio and want to participate in global markets by using their LRS funds to create an offshore investment portfolio. Some of these families have children studying outside India and are considering purchasing property outside too.
Are investing patterns changing?
Younger clients are more aware and keen to invest in new-age technologies such as artificial intelligence (AI) and machine learning. They are also keen to participate — in part or whole — in ventures that are in the consumer technology space and do not mind the option of buying into an operating asset.
There has been a steady increase in assets under management (AUM) of family offices in India. Where are they investing?
Family offices, depending on their size, are either buying operating assets or investing in stressed assets. Almost everyone else is invested in a portfolio of publicly-held equities and fixed-income instruments. We see family offices, in particular, buying into financial services and the consumer/B2B technology space.
While the structure of most family offices is designed to facilitate investment discussions, a growing number of family offices are looking beyond public markets.
What are the trends in wealth management in India in terms of distribution?
Distribution models are either open-architecture or a mix of captive and third-party. We believe that open-architecture is the best solution for clients. While clients in India, especially in the ultra HNI (high net worth individual) space, want to deal directly with each asset manager, we do see an eventual reversal in this trend in line with our global experience, with open-architecture making a strong comeback. There is an apparent conflict of interest when wealth managers suggest investment solutions where the money is being managed by their own asset management divisions. It is imperative for clients to evaluate each idea, keeping in mind their asset allocation, risk appetite and expectation of returns.