Do you know where some of India’s wealthiest families invest their family fortunes?
While traditional businesses and real estate remain popular, a new trend is emerging as more young children from these families become actively involved in managing and investing family wealth through the many family offices around the country.
Simply put, a family office is a private company that manages the investments of a wealthy family. For example Premji Invest by Azim Premji, Catamaran by Narayana Murthy, Sharrp Ventures by Harsh Mariwala, Patni Family Office, Burman Family Holdings or the Chona Family Office of the founders of Havmor Ice Cream.
According to Soumya Rajan, Founder and CEO of Waterfield Advisors, one of India’s largest multi-family office firms, private markets alternative investments offer global diversification in the form of international investments across asset classes, regions, currencies and commodities with sustainability being some of the most important trends in the field of family offices.
“The new generation is more adventurous with riskier investments like investing in seed-stage startups, privately held companies, newbie venture funds and greenfield real estate projects,” she says.
Rajan further told Business Today that there has been a global proliferation of family offices as more and more entrepreneurial families see such structures as an ideal vehicle for investing their family wealth.
What are the top 2-3 trends you see in the family office space in terms of investment opportunities/instruments?
Alternatives: Driven by innovative technologies, digitization and new business models, family offices are turning to alternative investments. At Waterfield, we define alternative investments as investments in private markets, covering both debt and private equity. When I started Waterfield, the average asset allocation to the alternative asset class was under 3%. Today we see this allocation in the 10-15% range of the total portfolio and it continues to increase.
Separately Managed Accounts: Additionally, in the alternative space, we are seeing growing interest from clients in a separately managed account (SMA) that can be created for their specific alternative strategies. It is a bespoke solution that efficiently deploys large pools of capital into bespoke strategies that can provide better control over investment and exit decisions and reduce investment costs.
Global investments: Family offices want to diversify their portfolios internationally across asset classes, regions, currencies and commodities. We’ve seen this in both rupee-denominated products and increased remittances through the LRS window.
Assets with meaning: The driver is the NextGen in family businesses for which climate and sustainability issues have the highest priority. As wealth inequality increases, we also see a growing social awareness of giving back to the less privileged.
Does founding a family office help to better invest family assets?
With many aspects of their long-term planning tied to their investment portfolios, most families find that family offices are the ideal structure for implementing a cohesive wealth management strategy. Where a family’s financial needs are complicated, a family office offers an integrated service model that covers all finances in one place. The oversight that a family office can provide greatly reduces the oversights created by individual financial silos.
Do family offices invest in related areas of their business or are they also open to new industries?
Family offices are very interested in alternatives. As family offices look for exponential returns, they’re looking for ways to give back to the entrepreneurial ecosystem because they’ve been entrepreneurs themselves in the past. For example, if the family’s business is primarily in healthcare, their family office might consider investing in diagnostics, wearables, and robotic surgery. etc. It’s an extension of their core competency. They are looking for ways on how to be mentors, how to share their experiences and also make great returns. Some of the large family-owned capital pools today are managed by young scions of wealthy entrepreneurial families. The new generation is more adventurous with riskier investments such as investing in seed-stage start-ups, privately held companies, newbie venture funds and greenfield real estate projects.