High net worth investors make haste slowly

Sajjan Mehta (name changed), a high net worth investor (HNI), had moved most of his money to debt funds and fixed deposits after the markets went into a tailspin last year. But when the Bombay Stock Exchange’ Sensitive Index went up over 30 per cent within a month in April this year, Mehta could not resist buying equity again.

“I had to recover the money I lost when markets tumbled last year,” he said.

Mehta’s tribe is growing as the stock market recovers, but caution is still the buzzword. Take Ajay Kashyap, another investor. He is still apprehensive of taking large equity exposure, but doesn’t want to miss out on the money he could make in a rising market. So he has signed up for products that would enable him to book profits regularly. As the markets continue to do well, he has started moving gradually into equity-related products.

The trend has attracted the attention of fund managers who have resumed launching products targeted at HNIs.

For example, ICICI Prudential Asset Management’s portfolio management service (PMS) raised Rs 150 crore in its India Recovery Fund that closed in May. That’s significant, as a few fund houses such as DSP Blackrock had closed down their PMS business in April this year.

The AMC’s Target Return Fund mopped up Rs 800 crore in May. “We decided to launch this product on a bigger scale after a similar scheme in the PMS became an instant hit with our HNI customers,” said Shahzad Madon, executive director, ICICI Prudential Asset Management. The India Recovery Portfolio that closed in mid-May surprised everybody by raising Rs 150 crore

ING Investments, too, collected Rs 50 crore from HNI clients for its niche equity scheme that is based on a quantitative model. Navin Suri, chief executive officer, ING Investment Management, said: “The success prompted us to launch another scheme on Monday that uses the BSE 200 as the benchmark.”

According to a report by Barclays Wealth and Economic Intelligence Unit, more HNIs are looking at domestic equity in the medium term. “Close to a third of wealthy investors feel that they will increase their exposure to domestic equity over the next 12 months,” said the report.

Birla Sun Life Wealth Management also sees demand for structured products. “But they need to be more theme based,” said Kanwar Vivek, CEO, Birla Sun Life Distribution Company.

After the market rally, HNIs have also moved to take sector-based calls. All the wealth managers said HNIs were betting big time on infrastructure and related sectors. “With the recent rally across the board, investors' choices are likely to be more sector-specific.” said Satyanarayan Bansal, chief executive officer at Barclays Wealth (India).

ICICI Prudential, HDFC Standard Life, Max New York Life and Birla Sun Life have widened their HNI portfolio and have launched a range of ULIPs and guaranteed return products. Most of these have a minimum premium of least Rs 1 lakh.

HDFC Standard Life has also joined in by launching a product targeted at HNIs called Unit Linked Wealth Multiplier. The minimum premium is Rs 2.5 lakh.

While money has started to flow in at a moderate pace in equities, there are certain asset classes and sectors of which HNIs are still wary. “The wealthy do not want to commit any fresh calls to real estate whether it is stocks or buying actual property,” said Vivek of Birla Sun Life. This is because these investors already have property in their portfolio by means of a second home, farm house and so on.

Even offshore investments have taken a huge beating. “Investors are finding the domestic market more attractive than investing elsewhere,” said a wealth manager. Similarly, there has been a waning appetite for alternative asset classes such as private equity since investors do not want to lock in money for a long duration of five to seven years.