Alternative Investment Exposures Would Grow Significantly In Coming Years: Abhijit Bhave

In an exclusive interview with BW Businessworld, Abhijit Bhave, CEO, Karvy Private Wealth talks about UHNI investors and more

Over the years, have you observed any discernible behavioural differences in the way UHNI’s approach their investments/portfolios? 

UHNIs are more diligent in allocating funds and are more informed. Transparency in fees and charges is expected and Investors are more cost-conscious. The investment decision-making process for UHNI investors has become more sophisticated, and asset allocation is of prime importance. 

How would you describe the attitude of the majority of UHNI’s towards risk-taking? 

Trends indicate a shift of portfolio exposure towards alternative investments. Direct venture capital investments and absolute return strategies among the most popular investments in UHNIs and Family Offices. Calculated risk-taking and tactical allocations can be seen in portfolios. 

How inclined/disinclined are UHNI’s towards plain vanilla products such as Mutual Funds? Are they more inclined towards investing directly into stocks? 

Core portfolio allocations consist of both Mutual Funds and Direct Stock and Bond Investments. Both approaches go hand in hand and are equally focussed in UHNI portfolios. 

Broadly speaking, how do UHNI’s approach their real estate investment portfolios? Do they prefer to buy land or to invest through vehicles such as REITs? 

Commercial properties and commercial asset funds are popular. Direct investment depends on the ticket size of the property. Land purchases are still done directly as it has a heavy home city bias. 

In your observation, how inclined as UHNI’s towards making angel investments/growth capital investments in start-ups/ VC investments? Do they generally prefer to do these directly or through a fund? 

Initially, these investments were done via VC funds as direct access to such deals was limited. Over the last two years, we have seen a surge in direct deals by Family Offices and UHNI investors. This indicates that the Indian VC industry is maturing at a fast pace. The reason behind this is first, investors do not want to shell out fund management expenses and profit-sharing, secondly, they wish to be a part of the management and decision making in these start-ups providing their network and expertise, and thirdly, they might have synergies with the investee companies for their running business and are looking at these companies as probable takeovers in the future. 

How would you describe the attitude of most of your UHNI clients to philanthropic endeavours? Do you believe that a specific vehicle to this effect, would be of interest to UHNI’s? 

UHNIs usually make philanthropic contributions through their own charitable trust or foundations. They usually dedicate efforts to a cause which may be personal in nature or related to their profession/business which gives them a deep understanding of the issue and makes them better equipped to tackle it. 

What product gaps need to be filled in the Indian market for UHNI’s, compared to more evolved global markets such as the U.S & Europe? 

Venture Capital/Private Equity investments still a minuscule part of the overall portfolio. More sophisticated products on the fixed income side are yet to enter India. Alternative investment exposures would grow significantly in the coming years. 

Do you find resistance within the “old money” UHNI’s towards more complex investment products such as structures? Are they generally more inclined towards traditional avenues such as Bank Deposits? 

The old money has also evolved with changing trends and we see these investors opting for better tax-effective avenues for investments. Though we still see higher exposure to bank fixed deposits and bonds than structured products. 

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Mistakes women should avoid in order to achieve financial stability

Invest in regular health care program and for the long term to create wealth and lead a stress a free life

Today's women are juggling between high-pressure work environments, fast-paced social life and simultaneously managing the family, which can sometimes put money management on the back seat. A few money management mistakes if avoided in the earlier part of life can help women hand carve and secure a financial future. It is advisable that they start their financial planning journey with the help of an advisor, who will help in drafting a customized fiscal road map, ensure optimum asset allocation as per the risk profile and simultaneously help in the execution of the investments.

The seven mistakes that a woman should avoid being financially independent are

1.    Not having a contingency reserve of six months expenses

2.    Not investing regularly in a diversified portfolio with the right asset mix as per the risk profile

3.    Not creating a retirement corpus Not creating a sufficient corpus for children's education

4.    Not protecting against risks to health and life by buying sufficient health and life insurance

5.    Spending too much in impulsive purchases & not keeping avoidable debt under control and

6.    Being too dependent on the male members of the family like husband and father to manage finances and being oblivious of the process is a fundamental flaw which should be avoided

7.    Being financially literate is not a choice today but a necessity.

Have an emergency fund

The blunder of not having a six months contingency reserve in the bank account / liquid funds may have dire consequences in case of job loss or medical emergencies. Having a contingency reserve allows bouncing back in case of any eventualities.

Diversify your investments

We all know the importance of "Not keeping all our eggs in one basket" and so investments need to be diversified. While it is important to start investing early to take advantage of the power of compounding, it is more important to ensure the discipline of continuity of regular monthly investments. Systematic investment plans (SIPs) in mutual funds are a smart solution to this.

Health, wealth and happiness

Retiring from work is obvious, but many women fail to plan for post-retirement. Starting retirement savings in the early part of life leads to a larger retirement corpus, which eventually provides for better post-retirement security. Being frugal and cautious by nature, women prefer to keep money in a savings bank account or make investments earning a fixed rate of interest. A higher allocation to equity generally results in building a larger retirement corpus, though the right mix should be identified after speaking to your financial advisor.

The same is true the women who are mothers. Their biggest prized possession is their child and there the most important goal is the child's education. Higher education costs are growing every year and regularly investing in equity mutual funds through the Systematic Investment Planning (SIP) route and increasing this amount regularly as incomes grow, after discussing the exact amounts needed with the financial the planner is a good solution to achieve this goal.

Life is unpredictable, but managing finance well isn't. The importance of life insurance and health insurance is paramount. Empirically it is seen that women, in general, live longer than men, which increases the importance of health insurance.

Expenses from activities like frequent dining out and impulsive shopping, using credit card borrowings, may lead to a ballooning of debts and then into a debt trap and realization often comes late, when actually one starts checking the interest charged on the credit card statements. It is important to stick to a monthly budget, and as soon as one receives the monthly income, transfer 20 to 30 % to a separate bank account for investments. Also, many mobile apps are now available, which help in tracking monthly expenses and also show the trends in spending. Expense control is a critical step in wealth creation. It is rightly said, "A rupee saved is a rupee earned".

Inheriting money from father or sometimes after the unfortunate death of the spouse generally leads to the acquisition of a large chunk of money. The vulnerability at that moment is also high. It is advisable to protect and invest such corpus wisely, after taking advice from a legal counselor and a financial advisor or getting in touch with a wealth management firm, who provides a 360-degree service.

In a nutshell, every woman should keep this mantra of HWH (health, wealth and happiness) in their mind while participating in the race of life. Investing in a regular health care program, investing in the long term to create wealth and living a stress a free life should be the essence for today's modern women.

The writer is CEO of Karvy Private Wealth

Read at  https://www.dnaindia.com/personal-finance/report-mistakes-women-should-avoid-in-order-to-achive-financial-stability-2733561