MUMBAI: It is that time of the year when one looks at not just the broad trends the year witnessed, but also at one’s own portfolio, the hits and misses, before planning for the upcoming New Year. We spoke to Ankur Maheshwari, CEO, Equirus Wealth Management, to find out about trends in wealth management and investor preferences.
What has been the general trend in investments and what is the outlook?
There are some clear trends emerging in the last three to four years. People are now inclined towards putting their savings in financial products in a more meaningful way than what they were trying to do earlier. To some extent, it has been supported by a dull real estate market and not-so-great performance by gold as an asset class.
Somewhere, demonetisation was also giving some fillip. Hitting Rs 25 lakh crore (Mutual Fund assets under management) was a phenomenal growth. The best part here is the granularity of the participation. It is not that lumpy money or large HNI money, the SIP book is a sign that retail participation is coming into the markets in a meaningful way. That is a comforting sign.
What about the wealth management industry in specific?
It is quite logical to assume that if the industry is growing in terms of size and AUM, wealth management as an industry should be a beneficiary of that. Say PMS (Portfolio Management Schemes) or AIF (Alternate Investment Fund), they have also seen significant increase in AUMs in the last two to three years.
These are evolved products, not easy even for HNIs to understand on their own. These are, therefore, coming to the market only with the advice and guidance of wealth managers. There are some non-financial products also: estate management is not discussed and focused on in India.
Also, legacy planning and succession planning. These things are gradually evolving, and wealth management is able to provide a holistic solution. Instead of selling a particular product or an asset class, clients should get genuine guidance from a wealth advisor, who is able to review the portfolio well, look at the trends in the market, and align the portfolio in asset allocation.
But hasn’t direct equity also been emerging as a preferred option?
There is definitely interest in direct equity as well as professionally managed services. What we sort of advice customers is that as a layman, one may have limited time to do research, have less ability to study the companies in detail, and lastly, it is not one’s core job. Therefore, money management is best left to experts. People definitely have some interest in accumulating names that they think will do well. We believe that it is best done by a professional fund manager. Retail and new investors, especially, should take that route and not the direct equity route.
What about the products preferred?
People have realised that the simplest products deliver the best performance in the long term. While there is always a segment of clients who love Alternative Investment Funds, debentures and things like that, the market has only shown that over a 10-year period, a good multi-cap fund IRR would be equally good.
In the ultra-HNI space, AIF is becoming popular, but in the retail and emerging affluent space, mutual funds and retail products are proving to be popular. In the HNI space, PMS is gathering attention.
We advise customers that portfolio construction has to be in terms of a core and tactical. Your core has to be stable, steady and long-term calls you want to take. If you want to have a tactical play, thematic or cyclical, that shouldn’t become the core of your portfolio. You can decide the ratio of core-tactical in a portfolio.
Pre-IPO, unlisted equity, how comfortable are investors with that?
In 2017, when the markets were doing well, pre-IPO that came through the AIF route got a lot of AUM. In 2018, we have seen the reversal of the market.
And therefore, people who came in through that route are now raising questions about the performance. I would maintain my stand that things which look very exciting should be restricted in a portfolio.
Pre-IPO is a unique strategy, but it should be 5 per cent allocation in a portfolio, not 50 per cent. Build a core portfolio, then you can top it up with different ideas that keep coming in the market.