Instruments wherein High Net Worth Individuals (HNIs) and Ultra HNIs want to park their money - Expert reveals

Pandemic has led to a significant rise in the proportion of retail and professional participation in overall trading volumes on exchanges. This segment comprises individuals including High Net Worth Individuals (HNIs) and Ultra HNIs in India. Work from home, concurrent market buoyancy, and the need to supplement incomes have driven up direct equity trading activity amongst individuals. Alongside, direct thematic basket investments have also caught fancy as new digital broking platforms as they have democratised such options for all investors and enabled quick access as well. Rajesh Cheruvu, Chief Investment Officer, Validus Wealth, shares his knowledge about the instruments wherein HNIs and UHNIs want to park their money.

MLDs, PTCs and Covered Bonds

Rajesh Cheruvu says, “On the onshore fixed income front, MLDs, PTCs and Covered Bonds have seen a lot of interest from the seasoned HNIs and UHNIs. These instruments are being lapped up by many, primarily for their better collateralisation structure, quality of issuers (A/AA rated and above) and higher real yields on offer. With the recent change in regulations from RBI, issuance of covered bonds looks difficult in future.”

HNIs upping investments

“With Unicorns emerging from Indian private markets every week, HNIs are also upping their investing game when it comes to investing in start-ups via allocating capital to marquee angel, private equity, and venture capital funds with a decent track record. And they are making investments across the board – right from early-stage seed A to pre-IPO. Similar heightened activity is seen in unlisted space especially in respect of investee companies that are closer to providing an exit to existing investors or promoters through IPO,” Cheruvu added.

Investment in public and private markets

Further, Cheruvu says, “This segment of investors is also showing a lot of interest in offshore investments. Pre-Covid, there was little enthusiasm in geographical diversification, but post-Covid, they have realised the ‘opportunity spread’ outside India. In India, options are limited for HNIs and Ultra HNIs, as only public equity and debt markets are active and have the required breadth and depth. The Investment universe is quite narrow due to the lack of attractive opportunities. But outside India, they can invest in both public and private markets be it in the US, Israel, Taiwan, Korea, or China. These investors are also looking at overseas markets as a hedge against rupee depreciation and to achieve lifestyle objectives like travel, retirement, home ownership, children’s education as well as access to best medical facilities.”

US, Japan and Europe

“Even as the US remains the most sought-after market for Indian HNIs and Ultra HNI investors, Japan and Europe are looking attractive from an Equity valuations perspective. In the case of offshore fixed income, the developed market real yields are hardly enticing and hence, investors are looking for internally leveraged funds. Market-neutral strategies will assist investors in generating relatively better returns than investment grade and sovereign bonds,” Cheruvu opined.

Golden Visa programs

“Another trend that is picking up speed amongst HNIs and UHNIs is around ‘Golden Visa’ programs that offer alternative residency options and a path to global citizenship. These Immigrant Investor Programs are government-sponsored that allows qualified investors and their immediate family members to obtain permanent residency in the easiest and fastest way. The investment must be made in predefined avenues for a specified duration at the end of which principal is returned with some programs even offering a nominal yield,” Cheruvu concluded.