Where are super rich investing? 10-15% portfolio getting allocated towards private deals: Anuj Kapoor


“Private deals are becoming an important and fast-growing asset class (average allocation between 10-15% of portfolio),” says Anuj Kapoor – MD & CEO, Private Wealth Group & Venture Capital Funds Platform, .

In an interview with ETMarkets, Kapoor said: “Service delivery based on transparency, cost efficiency, cutting edge technology and value adds like global opportunities, estate planning, business advisory, art, philanthropy and social impact investing has become the need of the hour,” Edited excerpts:

How are home-grown millionaires and billionaires influencing the wealth management landscape in India?
Most of the ultra-high net worth investors have become savvier thanks to the in-house family office set-up managed by an experienced team. These family offices have access to deals and opportunities directly from the originator.

Hence, the dependency on traditional wealth management firms or advisors has been reduced. As a result, wealth management firms are focusing more on offering differentiated products and services to engage with investors.

Service delivery based on transparency, cost efficiency, cutting-edge technology, and value adds like global opportunities, estate planning, business advisory, art, philanthropy and social impact investing has become the need of the hour.

Private deals are becoming an important and fast-growing asset class (average allocation between 10-15% of portfolio).

Boutique deal makers and syndicators are proliferating as they don’t need large distributors to access investors any more.

Many experienced wealth professionals are increasingly migrating to run single and multiple family offices leaving a talent gap in the wealth management industry.

How are the business families in India managing the wealth transfer?

Large business families are engaging estate planning services at an early stage to ring-fence and protect their assets as well as ensure a seamless inter-generational transfer of wealth.

They have also started actively restructuring their businesses to suit the vision and aspirations of the more tech-oriented next generations. Hiving off and monetising lesser-performing assets is helping businesses stay contained and manageable with a clear chain of command and succession.

Larger families are also exploring global diversification of wealth and creating multi-jurisdictional trust structures to ensure tax optimisation and efficient transfer of wealth to not just the immediate beneficiaries but also to their grandchildren and long-term commitment to social causes.

Some families are increasingly using corporate trusteeship companies to ensure that the legacy of the trust continues more efficiently and professionally across generations.

The need for estate and succession planning is not just limited to business families anymore. Senior professionals and entrepreneurs are also focusing on getting their house in order through planned successions and wills.

With global equities down in double digits – do you see this as a good opportunity to diversify globally or India remains a preferred play? What are your views?
Global growth projections were slashed from 2.9% to 2.7% for 2023 by the International Monetary Fund (IMF). Advanced economies are expected to grow at an even lower rate of 1.1% in 2023.

India’s growth estimates were lowered to 6.1%, but it is still higher among other major economies. India is in a sweet spot wherein economic growth should stand out vis-a-vis global economies for several years.

Strong demographics, stable political regime, improved ease of doing business, and the emergence of India as a manufacturer (alternative to China and Europe) are some of the factors that contribute to this proposition.

The unique opportunity in the Indian market plus the regulatory limits on global remittances suggest that India will remain a preferred investment destination.

Having said that, we also advise our clients to diversify their investments to global markets and particularly in the US tech stocks especially as they are available cheaper.

There is a general sense that the worst is not over for the global markets and as such many interested investors should either stagger their global exposure or wait for a better entry level.

2022 closed on a positive note, and 2023 started off on a muted note tracking global cues ahead of the Budget. What is your take on markets?
We believe that the global shift of de-risking of supply chains amidst uncertainties on the course of monetary policy action, inflation, and geopolitical conflicts, would keep the global markets volatile and prove to be positive for emerging market economies.

India’s robust domestic demand if coupled with coordinated fiscal and monetary measures will place it in a dominant position to capture the global manufacturing space as well as command higher valuation multiples.

We saw a little bit of weakness in the rupee – what is your call on the currency movement in 2023?
The confluence of high inflation, the US Fed’s hawkish monetary policy, geopolitical conflicts, and USD’s safe haven status have propelled the USD, leaving commodity importers exposed to currency depreciation. The INR weakened 11% against USD in 2022.

However, resilient domestic growth and the comfortable fiscal situation should support the INR, provided trade imbalance does not impair the CAD in 2023.

We believe that INRs trajectory in 2023 will be equally decided by global geopolitical and growth dynamics (still fluid) and appropriate domestic fiscal management.

We expect INR to trade in the range of 82-84/USD in 2023. Any weakness in crude price will act as a buffer to the economy, while any major spike could make it worse.

Which sectors are you overweight on in 2023 and why?

We would like to go overweight on private banks as we expect net interest margins (NIMs) to sustain at least till H1 2023. Defence sector would benefit from increased global defence spending.

Valuations need a close watch here. We would play the theme of revival in private CAPEX through industrials, cement, speciality chemicals and real estate ancillaries.

Which sectors are you underweight on in 2023 and why?

IT services could continue to remain under margin pressures due to cost pressures and uncertainties in the global economy.

New-age internet companies are also expected to continue to face pressure on valuation multiples and the accelerated need to show the path to profitability.

How should one play the small & midcap theme in 2023?
We believe post the pandemic, production is slowly and steadily moving from Europe and China to India. As India GDP is expected to grow to US$5 to 10tn in coming years, mid and small corporates are expected to be the key beneficiaries of this growth.

These corporates unlike larger companies with management hierarchies and organizational structures in place, are more dynamic and in the stage of evolving their organizations.

There are attractive opportunities with high-quality and growth potential companies. We suggest our clients to play out this opportunity through funds having a long and proven track record.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



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