04/08/20

ASIA: Family offices seek out foreign partners as HNIs look to invest outside India.

As published on livemint.com, Thursday 30 July, 2020.

A surge in international investing by high net-worth individuals (HNIs) is pushing family offices in India to enter into foreign partnerships to deliver advice on investing in global markets.

In May, Waterfield Advisors, which manages assets worth around $3.7 billion across 70 families in India, tied up with Zephyr Management, a US-based firm to manage international investments of its clients. Other family offices have also forged alliances with advisers in the US and Singapore.

Indian residents are allowed to invest up to $250,000 per financial year abroad in instruments such as stocks and bonds as per the Reserve Bank of India’s (RBI) liberalized remittance scheme (LRS).

"Global markets have outperformed India over the past four-five years. Rupee depreciation against the dollar has also made them more attractive. Many families also have members who live abroad, giving them more familiarity with the international markets. We started offering international investing in 2017 and we've seen a sizable uptick in interest over the past few years," said Unmesh Kulkarni, managing director, senior adviser and head—markets and advisory solutions, Julius Baer Wealth Advisors (India) Pvt Ltd.

The underlying demand has created the need for international advice, say firms.

"In today's world, there is more emphasis on pushing products rather than delivering advice. With foreign markets, there is the added disadvantage of unfamiliarity and limited experience that Indian investors face. This is why advice becomes important," said Sadaf Behbahany, managing director, Waterfield Family Office.

Rajmohan Krishnan, principal founder and managing director, Entrust Family Office concurred.

"With unprecedented central bank money printing in the major economies, it has become important for people to diversify their portfolios, including from their own home currencies. We are finding based on various conversations that there is an increasing need for international investing but a lack of credible options," he said.

Krishnan also highlighted the need for low-cost and transparent international advice.

“Till date most of the options for international investing have been through complex structures with hidden fees, pursuing the flavour of the season. This combination meant many investors found their investments locked up in unsafe and low-quality investments while distributors have been rewarded," he added.

International investing under LRS brings with it a certain number of costs such as currency conversion, advisory fees and brokerage. Family offices differed on the extent of such costs but most put it in the range of 0.75-2% per annum.

“We generally recommend it only for clients who are willing to invest $100,000 or more," said Prateek Pant, co-founder and head, products and solutions, Sanctum Investment Management. Sanctum also has entered into tie-ups with US Securities and Exchange Commission (SEC) registered financial advisers for advice on international investments, he said.

Investors who are diversifying outside India should check the credentials of the entity they are dealing with. For instance, in the case of US advisory firms, check if they are registered with the SEC. Going through an Indian adviser may give you an extra layer of vetting.