Debojyoti Ghosh | TNN
With economic conditions around the world expected to change in the coming years, there are certain areas that high networth individuals (HNIs) should focus more on while building their investment portfolio.
Mergers and acquisitions are expected to reach a higher scale, considering the need for consolidation and scale. “Therefore, a lot of investment from HNIs is bound to funnel M&A related deals,” says Mrunmay Das of Das Capital Management and Advisors. Private equity (PE) will remain in vogue in 2008, but more wealth will follow the exotic PE route with complex payout structures, adds Das.
With the government relaxing the norms for Indians investing overseas, the trend of HNIs investing in foreign assets could see substantial ramp up as people go in search of returns, which are getting priced out in India.
The equity market behaviour in the latter part of 2007 has mystified even experts.
“The wealth management strategies of HNI investors should focus on the aspects of greater diversification through customized innovative strategies looking at the present market scenario and the high liquidity factor,” says wealth consultant Anand K S.
Fixed income is expected to make a return to the portfolio in some shape this year, compared to 2007, when it was almost negligible.
It may come in various forms of structuring compared to plain vanilla debt papers or bank deposits.
With the global interest rate environment softening, initiated by the Fed rate cuts, fixed income could experience the bull-run seen in the early part of this decade. “Interest rates in India have peaked compared to other developed economies and may start falling, albeit slowly, in 2008. This will only give healthy returns from a fixed income portfolio,” says Das.
Commercial real estate will become a key investment option for large HNIs. Second rung cities with SEZ opportunities are expected to attract sizable allocation. Large real estate companies may turn direct borrowers from HNIs through attractive structured products with higher coupon-plus-conversion rates.
PREFERRED ASSETS
Real estate: Go beyond the purchase of a second home or farm house. Instead look for direct investments in projects under construction or through leased properties.
Art: Exotics like art will become a normal part of the asset allocation and may move towards losing the exotic title in the coming years. Good option to diversify your portfolio.
Gold: Buying gold bullion coins is a good option to capitalize on the price movements of the precious metal. The other option is to invest in Gold Exchange Traded funds, which are available for trading on stock exchanges.
Structured products: Invest in securities that combine the characteristics of traditional investments like stocks and bonds with foreign exchange, commodities and hedge funds.