Dalal Street Voice: Sameer Kaul of TrustPlutus Wealth talks about investment avenues for HNIs & long term wealth creation

HNI’s/UHNI’s have become increasingly tech-savvy and are willing to complete the entire documentation even for products such as PMS’ and AIFs digitally, Sameer Kaul, MD, and CEO, TrustPlutus Wealth (India) said in an interview with Zeebiz’s Kshitij Anand.

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Sameer has a rich experience of over 25 years. He has held various positions heading operations, mortgages, retails banking, private banking, and wealth management across leading domestic and global entities.

Over the years, Kaul highlighted that many new investment options have been added for HNI investors in India, outside of vanilla mutual funds and stocks. Edited excerpts:

Q) What is your call on markets which has managed to survive negative global cues?

A) The market has run up significantly since March 2020 and in our view valuations are running ahead of ground reality. The next few quarters will be crucial to gauge whether the expected growth in corporate earnings is in line with estimates that can then justify the rich valuations.

Some of the triggers to watch are the Q2FY22 corporate earnings, any action from central banks (domestic as well as globally) and also the potential spike in inflation led by an increase in the price of commodities such as oil and natural gas.

At this point, with the improved vaccination rate we sincerely hope that even if there are future waves, the impact of businesses and the economy is muted.

Other risk factors are withdrawal of liquidity by global central banks, increase in developed market interest rates and locally earnings growth of companies should justify the valuations of equity markets

Q) As we enter the festive seasons what is your advise to investors? The festival mark the victory of good over evil – any evil habits in stock market investment/trading which investors should avoid?

A) We recommend that investors stick to their asset allocation which is based on their risk tolerance. Within that asset allocation, they should buy into high-quality companies, perhaps in a staggered manner.

As far as fixed income is concerned, we are recommending high-quality credits as well as investing at the shorter end of the curve. We also like products with a defined maturity within the fixed income space.

During a bull market, it is easy to get carried away in terms of investment decision-making and over allocate to equities. There is also a tendency to increase allocations in mid and small caps.

Investors should periodically rebalance their asset allocation and stick to their long-term investment objectives. They should not rely on unsolicited advice and should invest only in well-researched companies or through other avenues such as mutual funds.

Q) MF data for September is encouraging. Mutual Fund monthly SIP contribution breaching Rs 10,000 crore milestone for the first time ever and industry AUMs touching all-time high at INR 36.73 lakh crores is historic. What are your views and where do you see the trend heading?

A) The ‘financialisation of savings’ in the Indian markets is truly underway as is evident in the MF data over the last few years. While there was a blip during the pandemic, flows have picked up in the last few months.

Given the demographics of the Indian population, rising disposable income, ease of investing due to technological driven advances we feel that this is a long-term trend that that will continue into the foreseeable future.

Q) How do you see the growth of the PMS industry in India, especially after the pandemic? What does the trend suggest?

A) PMS as an investment vehicle that has seen a surge in AUM driven by flows from HNIs. The funds raised under PMS have increased from INR 11.19 Lac Cr. in July 2016 to INR 21.77 Lac Cr. in July, 2021.

While mutual funds by design are more diversified in their portfolio construct, PMS’ can take concentrated bets. Investors can take benefit of style diversification across managers by investing in a combination of MFs and PMS’.

Q) What is the trend you are seeing from HNI as well as UHNIs when it comes to investment in Indian markets? Are they focussed more on equities/IPOs or debt-related instruments?

A) Over the years, many new investment options have been added for HNI investors in India, outside of vanilla mutual funds and stocks. For instance, HNIs can now invest in Sovereign Gold Bonds/Gold ETFs, they can take exposure to real estate through Real Estate Investment Trusts (REITs) or real estate linked debentures, InvITs are an attractive vehicle to invest in infrastructure assets and Liberalized Remittance Scheme (LRS) and rupee-denominated fund of funds are an attractive way to diversify the portfolio.

Last but not the least, ideas such as pre-IPO investments, venture debt, private equity and hedge funds are also finding takers from within the HNI/UHNI community.

Several HNIs are interested in private markets since a lot of the paper wealth is getting created amongst early/mid-stage companies.

Investors are able to access such companies either through the venture debt route or through venture capital/private equity funds. As with public markets, businesses that are privately held but have good unit economics are worth investing into.

HNIs are always attracted to products where the underlying is real estate. While real estate funds, as well as exposure taken bi-laterally on real estate issuers, were popular in the past few years, some of those investments have turned sour and investors have had to resort to litigation to recover their dues.

While there should be a place for real estate in the portfolio, investors should gauge the return expectations, risk profile and liquidity challenges before making fresh investments in this asset class. HNIs are taking part in real estate investments in fractional investment mode through REITs.

Q) What are the trend you are seeing when it comes to international investing?

A) Investing in global markets as a part of one’s overall asset allocation is a trend that has witnessed increasing interest from HNIs/UHNIs. International investments not only help in portfolio diversification but also allow one to invest in companies/themes which may not be available domestically.

Again, several HNI families are also considering these investments to build a corpus offshore for goals such as higher education of their children abroad.

Investments in global markets can either be made through the Liberalized Remittance Scheme (LRS) route or by investing in Fund of Funds (FoFs) of domestic Asset Management Companies (AMC). There are several platforms through which investors can open an offshore trading account and remit funds under LRS.

In this case, one needs to adhere to the LRS limits which are currently USD 2,50,000 per individual per annum. On the other hand, investments in FoFs of domestic AMCs are done in local currency and thus there is no limit on the amount of investment in this case.

Q) How is the wealth management changed in India especially after the pandemic? Do you see the change happening in the way families are taking interest in doing estate planning, retirement planning, and planning for unforeseen events such as COVID?

A) The importance and awareness of estate planning has been increasing over the years but has been accelerated due to the pandemic.

Similarly, there is a lot more emphasis on life and health insurance and whether a family is adequately insured. Families have realized the importance of creating a diversified portfolio in line with their investment objectives and levels of risk tolerance.

The advent of several fin-tech platforms offers investors the ability to make investments in vanilla products such as mutual funds in a matter of minutes.

HNI’s/UHNI’s have become increasingly tech-savvy and are willing to complete the entire documentation even for products such as PMS’ and AIFs digitally. Investors also prefer to have real-time digital access to their investment statements.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)