HOW THE RU­PEE IS DI­VIDED

Business Today - - BUSINESS - @ EKu­marSharma

Fam­ily of­fices are still in­vest­ment ori­ented but there are also those that have been cre­ated to deal with larger is­sues of suc­ces­sion” Soumya Ra­jan, Founder, MD and CEO, Water­field Ad­vi­sors

maran Ven­tures, fam­ily of­fice of NR Narayana Murthy. Ask him about Catamaran’s big achieve­ment and he says: “Our team size has ex­panded, we have un­der­stood more about the com­pa­nies we in­vest in, set up Anviti, a new in­sur­ance and rein­sur­ance broking com­pany. Then, the part­ner­ship with Ama­zon (to help small and medium busi­nesses get on­line and tap into on­line cus­tomers) is do­ing well.” But then, how is the wealth in­vested by fam­ily of­fices? On what ba­sis are in­vest­ment de­ci­sions made? “We keep it sim­ple. We look at ex­cep­tional busi­nesses in the listed and un­listed space that are run by ca­pa­ble and eth­i­cal man­agers, have a long run­way ahead and cre­at­ing tremen­dous value to the end mar­kets they serve,” he says.

It is ap­par­ent that in­vest­ment needs care­ful anal­y­sis. Typ­i­cally, as Busi­ness To­day gath­ered, in­vest­ments tend to get seg­re­gated into three cat­e­gories. One is the con­ser­va­tive risk cap­i­tal, which, Ra­jan de­scribes as the “fam­ily’s go-to money in the event of a ma­jor fi­nan­cial col­lapse or if a black swan event hap­pens. This is the pool of cap­i­tal that the fam­ily can fall back on and could be in the form of a sov­er­eign debt, tax free bonds or fixed de­posits or other such in­vest­ments that are ex­tremely safe.” This would typ­i­cally make up for about 25 to 30 per cent of to­tal port­fo­lio. About 15 per cent of the to­tal kitty is at the other end of the in­vest­ment spec­trum. That is, if there has to be 10 to 12 per cent post tax re­turn on the over­all port­fo­lio then you need to have in­vest­ments that are giv­ing you 16 to 20 per cent re­turn. This could be in ven­ture cap­i­tal, pri­vate eq­uity, an­gel and seed in­vest­ment space. That can give ex­po­nen­tial re­turns over a 7 to 10 year pe­riod. It may not be more than 15 per cent of the over­all port­fo­lio of a fam­ily of­fice. The bal­ance or the re­main­ing funds – about 60 per cent of the to­tal kitty – sits in what is called the mar­ket pool. This could be in listed eq­ui­ties, fixed in­come, all prod­ucts that are mark-to-mar­ket in­vest­ments. Here, they need to beat lux­ury in­fla­tion for these are peo­ple who in­vest in high end cars, jew­ellery and life­style hol­i­days.

Risk Mon­i­tor­ing

Fam­ily of­fices typ­i­cally mon­i­tor in­vest­ments and ad­vice fam­i­lies on when to stay put and when to exit. For in­stance, Soumya Ra­jan gives the ex­am­ple of the re­cent Pun­jab Na­tional Bank fraud and says that fam­ily of­fices were also ex­posed to the fall­out be­cause var­i­ous mu­tual funds were hold­ing the bank's stock and debt. “At Water­field we quickly started tak­ing stock of the de­vel­op­ments and as­sess­ing the risks that our fam­i­lies could face and see how to ringfence their in­vest­ments from such ex­ter­nal risks and shocks,” she says.

So, what is the way ahead? “Our as­pi­ra­tion is to be a pre- em­i­nent, glob­ally re­spected in­vest­ment firm that even global in­vestors would reach out to for help to ei­ther un­der­stand as­pects of a sec­tor or spe­cific com­pa­nies,” says Catamaran’s Lak­sh­mi­narayanan.

Clearly, fam­ily of­fices would gain heft over the next few years.

Con­ser­va­tive risk cap­i­tal, go- to funds in case of emer­gency. 25%

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