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Alternative Investment Funds – Gaining Popularity in India

May 29, 2023

While fixed deposits, stocks, and bonds are still good long-term investment options, many savvy investors are now opting for alternative investment funds (AIFs). These financial instruments have the potential to give high-returns by investing in various asset classes. AIFs have recently become extremely popular among the HNIs looking to diversify their portfolio and grow their assets.

India and Asia, as a whole, are poised for the next significant expansion of alternative investment products. According to a report by Anand Rathi, AIFs in India are expected to grow by 25% between 2022 and 2025. The industry and the market are currently geared toward an alternative investment funds paradigm shift.

According to a report, wealth managers offering AIF products as alternatives to high net worth individuals (HNIs), family offices, and insurance companies will drive overall investments through AIFs to grow at a 25% CAGR between 2022 and 2025.

What are Alternative Investment Funds?

AIFs are essentially pooled investments that also invest in futures, hedge funds, private equity, and venture capital. Although the Securities and Exchange Board of India (SEBI) only introduced AIFs in 2012, they have quickly grown in popularity among many investors. High-net-worth investors can access assets that might not be directly related to the stock market through alternate investment funds (AIFs). In addition, compared to mutual funds and bonds, it provides them with investment diversification and potentially higher returns.

Let’s discuss in detail different types of Alternative Investment Funds in India.

Category I

This category includes Category I AIFs that invest in SMEs, start-ups, and other small businesses with high growth potential. Additionally, the Indian government provides tax breaks for people who invest in this sector. Due to the fact that investments in Category I appear to have a multiplier effect on the economy in terms of wealth and job creation.

Venture Capital Funds (VCF): VCFs invest in start-ups with high valuations who, however, are momentarily lacking in funding for expansion. VCFs invest in high valuation ventures by pooling money from individual investors.

Infrastructure Funds (IF): These funds make investments in the construction of public facilities like roads, bridges, dams, and rail lines. Dividend income and capital gains are typically combined to form the returns from this type of AIF.

Social Venture Funds (SVFs): They invest in businesses with a strong social conscience. These businesses make money while resolving environmental and social problems.

Angel Funds: Venture capitalists form an angel fund, a type of VCF, to support start-up businesses or aid in their growth.

Category II

Funds for Private Equity (PE): You can invest in unlisted private companies through PE funds. This sub-category is chosen by people who want to diversify their financial portfolio and include a potentially high-risk AIF.

Fund of Funds: The Fund of Funds combines numerous AIFs into one.

Debt Fund: As its name implies, this type invests in debt securities of both publicly traded and privately held businesses.

Category III

Private Investment in Public Equity: These funds are pooled and specifically designated for investments in public equity. Private investment in public equity funds.

Hedge Fund: Hedge funds pool capital from both individual and institutional investors to make high-yield investments in domestic and foreign markets.

The traditional investment tools that investors are now exposed to include direct investments, mutual funds, unit-linked insurance plans, and portfolio management services. But the main purpose of these options is to trade securities. Investor demand for alternative investments remains unfulfilled.

Conclusion

Although investing in AIFs can be very profitable, there is a significant learning curve involved in doing so. Get financial advice from financial experts, if you want to invest in AIFs. Develop your investing skills while our team supports and grows your wealth with specialised wealth management solutions.

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Trends and factors that are influencing private wealth management in India

May 22, 2023

India’s wealth management industry is changing rapidly. The prosperous middle class is growing while the country’s high net individual population is estimated to grow by 75% from 3.5 lakhs in 2020 to 6.11 lakhs in 2025, according to a report. Ultra-high net worth individuals are expected to excel by 63% in the given period. India witnessed a record 14.2 million new demat accounts being activated in FY 21, the report signifies. 

Trends you should know about Private Wealth Management 

Exciting new opportunities are creating some positive transformation for wealth management solutions. If your business seeks to leverage these opportunities, then you need to know these trends:

  1. The makeup of investors is changing: The new generation of Millennial and Gen Z investors are always connected and prioritise using technology. They want to be able to communicate with financial advisors in real time via all available channels, including text messages and video chat. Additionally, they need constant access to investment options and portfolio information. This requires re-constructing the traditional investment ecosystems which are tailor-made to their demands.
  1. A hybrid future of wealth management services: The foundation of the wealth management solutions lies on personal relationships and human connections – and this will continue to be so. Customers still expect to be treated with compassion, honesty and understanding. However, they also look for experiences that are quicker, more practical, and smoother. The key enablers include digital technologies like robo-advisors and self-service investment portals. To increase productivity and respond to client demands more quickly, advisors will also adopt digital tools and process automation.
  1. Emergence of alternative asset classes: Millennials are very concerned about social and environment issues due to which ESG investing is becoming more popular. Young investors are shifting to non-traditional investments like passive investing, unlisted companies, private equity investing, etc. They actively seek out investment options that align with their environmental values.  
  1. Increasingly, advisory firms are subject to regulatory scrutiny. For example, the Securities and Exchange Board (SEBI) of India is paying more attention to advisory firms’ fee structures, data security and privacy procedures, adoption of AI/ML, use of crypto assets, and ESG (environmental, social, and governance) funds. Tax increases are also anticipated, which is a huge worry for investors. Advisory businesses will need to have a solid compliance program and system of controls in place in order to be proactive prepared.
  1. The “financialization of savings” is accelerating: Historically, physical assets like gold and real estate accounted for 95% of household wealth in India. However, investors are now favouring financial savings over tangible ones. They are more conscious that, in the face of rising inflation, an excessive concentration of wealth in non-financial assets might produce unfavourable returns. They can experience better returns and greater efficiency in terms of liquidity and contingency planning with a more balanced approach to portfolio creation.
  1. Financial planning is becoming more holistic: The newest investors are fusing monetary objectives with moral and non-material objectives. They are searching for more all-encompassing investment solutions that cover social welfare, impact investing, estate preparation, and retirement planning.
  1. Hyper-personalization is essential right now: A one-size-fits-all strategy is no longer effective with investors. They demand carefully chosen, specially tailored, and contextually relevant offerings. Whether it’s investment products, marketing emails, or call centre service, every customer touchpoint needs to be personalised to gain customer loyalty and trust.

Conclusion

India’s private wealth management industry is poised for significant growth, driven by shifting investor demographics, emerging alternative asset classes, and rising regulatory scrutiny. With the increasing affluence of the middle class and the growth of the high-net-worth individual population, wealth management firms must adapt to meet the evolving needs and expectations of investors. By embracing digital solutions, incorporating non-traditional investment opportunities, and providing more holistic and personalised services, private wealth management firms can capitalise on these exciting new opportunities and position themselves for success in the years to come.

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Things to know about the NPS calculator!

May 19, 2023

The National Pension System, or NPS, has emerged as an attractive and low-cost investment option for people who are searching or looking to create a corpus for their retirement.

This investment tool offers Indian citizens an additional deduction for tax savings of up to Rs 50,000 under subsection 80 CCD (1B), in addition to the chance to build a retirement fund by investing in four asset classes of their choice. This is beyond the Rs 1.5 lakh deduction investment allowed under section 80C. The power to invest and increase one’s retirement fund rests with the investor because investments are market-linked and dependent on the performance of asset classes and investment decisions made by the investor.

By enabling investors to select between debt and equity based on their risk tolerance, the NPS calculator provides an estimation of the anticipated retirement corpus. Thus, it serves as a valuable resource for making informed decisions about NPS investments.

Who can use the NPS calculator?

The NPS pension calculator can be used by all those eligible to invest in the NPS scheme. According to NPS rules and regulations, Indian citizens between the age of 18 and 60 are eligible to invest in the scheme, respectively. Individuals must, however, submit the necessary Know Your Customer (KYC) documents before investing in the plan.

National Pension Scheme Calculator – Features

The National Pension Scheme Calculator has several useful features-

  •  Anyone can use the NPS return calculator as its interface is very simple
  • The NPS pension calculator can help you to calculate the right amount of your pension.
  • It also highlights how much you invested, earned, and how much you will get at maturity.
  • The NPS pension calculator is available to anyone if he/she is eligible to invest in the National Pension Scheme

Steps to calculate the required monthly investment

NPS pension calculator offers an opportunity to find out the required investment amount to gain planned retirement savings. It can be very useful for the users who have already planned their goals or retirement amount and they would invest in an NPS scheme according to their goals. Here are the few steps, you can follow while using the National Pension Plan calculator:

Step 1 – Enter the goal amount – Put the goal amount in your mind that you want to collect for your retirement years.

Step 2 – Select growth rate or investment planning – Investors can achieve their goals based on their investment planning and risk profile. They can choose from aggressive, moderate, conservative, or custom risk profiles. Custom risk profile gives them an opportunity to predict their rate of return as per their future requirement.

Step 3 – Age – Put your age and other vital factors for the NPS to calculate your retirement amount!

 Conclusion

The NPS pension calculator computes the monthly investment required to attain the goal amount at maturity based on the information provided in the three steps. A pie chart offers a visual representation of the invested amount and interest earned during the investment period. The calculator also displays the money saved by the investor through NPS investments during the investment tenure. Additionally, users can perform scenario analysis by adjusting the goal amount for inflation using different inflation scenarios of 4%, 6%, and 8%. This feature empowers users to anticipate the impact of inflation on their retirement savings and modify their investments accordingly.

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How to Balance Your Mutual Fund Portfolio

May 17, 2023

Investment in various asset classes, such as debt and equity, is a crucial strategy in personal finance. If you build a portfolio that fits your risk tolerance and investment objectives, having the right asset allocation can help a lot.

You take into account a variety of factors when it comes to mutual funds solutions, such as your objectives and risk tolerance, when choosing the appropriate asset allocation for your portfolio. There are many mutual funds services in India, known as AMCs (Asset Management Companies), who can help you with  mutual funds solutions and portfolio rebalancing.

After completing this portfolio-building process, you anticipate easily achieving your objectives. But here’s the problem. Your allocation to various asset classes will drift over time even if you don’t make any active changes to your portfolio. As a result of the market value of each security in your portfolio earning a different return, the situation changes. Their weight in your portfolio changes as a result. 

What should you do to get past this difficulty? The solution, then, is portfolio rebalancing. Rebalancing your portfolio involves buying and selling portions of it in order to restore the original weights of the various asset classes.

Let’s understand how to do portfolio rebalancing in this blog!

What is Mutual Fund Portfolio Rebalancing?

When it comes to mutual funds solutions, portfolio rebalancing is the process of adjusting the weights of a portfolio of assets. To maintain the initial or intended level of asset allocations and risks, it entails routinely buying and selling assets in a portfolio.

You can specify the weight of each asset class in the initial state. Additionally, you can use rebalancing to change the weightings of each security or asset class to conform to a newly created asset allocation if your investment strategy or risk tolerance for risk changes.

Importance of Rebalancing your Mutual Fund portfolio?

You can implement any changes you make to your asset allocation strategy and stay on course by rebalancing your portfolio. A list of some benefits of rebalancing your portfolio is provided below, as far as mutual funds solutions are concerned:

1. Keep the original asset mix  – You can see how your portfolio’s asset mix changes over time. Therefore, over time, the risks and expected returns of your investments may not be suitable for you. You may fix this by rebalancing your portfolio.

2. Enhancing risk management – The risks associated with an asset could change over time. As a result, you might need to reevaluate your portfolio’s risks and, if necessary, change the asset mix. However, systematic portfolio rebalancing allows you to manage the amount of effort you expend.

3. Helpful in implementing new investment plan modifications – As you grow older and wiser, you might learn new skills. Most investors also become less risk-tolerant as they get older. If you regularly rebalance your portfolio, it will conform to your evolving investment style and plan.

4. Buying low and selling high – Rebalancing encourages investors to sell assets with higher returns and buy more of those with lower returns. Rebalancing is a good long-term strategy for managing market risks, despite the fact that it may seem contradictory.

Conclusion

It may seem daunting but rebalancing your portfolio is not confusing. You sell a portion of an asset class that has performed well to make room for a security with slightly mixed recent performance. An investor’s portfolio of stocks may be adjusted to meet their needs. You may also use the market’s condition as a guide for making modifications, but this has several drawbacks, most notably expenses. Therefore, before making an investment, all investors should do their research. They should take help from fund managers to provide them with mutual funds solutions.

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Why are Private Wealth Management Services Important for HNIs?

April 27, 2023

High net worth individuals (HNIs) have unique financial needs and goals that require specialized attention. Managing significant wealth, mitigating risks, and ensuring that wealth is passed down to future generations are complex tasks that require expertise and experience. This is where private wealth management services come in, providing tailored solutions to meet the specific needs of HNIs. 

Reasons why private wealth management services are crucial for HNIs.

  1. Tailored-made Solutions

HNIs have diverse financial goals and risk tolerances, and a one-size-fits-all approach to investing is unlikely to meet their needs. Private wealth managers work closely with clients to understand their specific financial goals, assess their risk appetite, and create a customized investment strategy that meets their needs. This approach ensures that the investment portfolio is aligned with the client’s financial objectives, risk profile, and overall financial situation.

  1. Having access to special investments

Private wealth managers use their network to identify and evaluate these investment opportunities and give clients access to them, including private equity, hedge funds, and other alternative investments. 

  1. Tax planning

Effective tax planning is crucial for HNIs, as it can significantly impact their overall wealth. Private wealth managers have expertise in tax planning and can help clients optimize their tax planning, minimize liabilities, and maximize returns. 

  1. Review of investments

The ongoing review and restructuring of investments is another step in the investment process for HNIs. Investments must be periodically reviewed and modified to stay in line with each investor’s financial objectives and risk tolerance. Investments are monitored by Concept to guarantee long-term optimization.

Tips on how to select the right wealth manager 

Consider the following when selecting a private wealth manager to work with:

  1. Verify that the manager has knowledge of the fields you need assistance with, such as investment banking, financial planning, and accounting.
  2. Ask about pricing and evaluate whether the costs are reasonable for the services you require.
  3. Inquire as to whether or not the offerings are proprietary or nonproprietary.
  4. Look for a wealth manager who has worked with clients who share your goals and level of wealth.

Conclusion

While concluding, private wealth management services do provide expertise in wealth and portfolio management for HNIs and UNIs. Not only they offer tailor-made solutions to their clients but also adapt to HNIs busy and hectic schedules in order to give them hassle-free experience. They work collectively to lower the risk and maximize the returns for their clients.

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The Role AIFs Play in Diversifying Your Portfolio

April 26, 2023

Alternative investment funds are investment plans that allocate money to financial instruments other than conventional investment options. They consist of venture capital, private equity, commodities, real estate, angel funds, etc. So how can AIFs enable you to diversify your portfolio and invest for the long-term? Let’s find out!

Why is Diversification Essential?

The majority of your portfolio probably consists of stocks if you are an average investor or don’t know about other alternative investments companies. In a person’s larger portfolio, stock holdings are frequently regarded as risky. When the market is bullish, people can generate return over their investments.

When the market is weak or during a bear run, people are likely to suffer losses. Unlike investment funds, which frequently reallocate their underlying investments to mitigate these losses, their return is on the opposite side.

A diversified portfolio can help reduce risk when the market is volatile. A balanced portfolio can even assist in achieving secure returns over a set period of time, depending on the investing objective.


Alternative Investments in India – Factors to be consider before investing

What are some key factors you need to keep in mind before you decide to invest in an Alternative Investment Fund? Let’s discover

  • Time Horizon & Liquidity – Alternative assets are investments that lack liquidity and have much longer planning or time horizons. In the case of a private equity firm where the partner is limited, time is fixed at the time of contract signing for some alternative investments. Long-term horizons are also appropriate in situations where products are difficult to sell or take a long time to gain value. 
  • Sectors and markets – Analyze market and industry trends for the private companies you’re considering before investing in any private equity or debt fund, and pick those particular businesses in a given industry with a high level of complementarity. When making real estate investments, divide your funds among various property types or geographical areas.
  • Potential Risks and Threats – Diversification is one way to reduce risk, and alternative investments and assets come with different levels of risk. Going back to how time horizons are conceptualized, investments with longer or fixed durations are less risky because the market has enough time to recover from a downturn. However, let’s say someone decides to invest in a physical asset like a home, piece of land, natural resource, or collectible. In that case, there is a greater chance that the asset will be damaged, taken, or lost, increasing the risk.

Conclusion
Building strong and diversified investment portfolios requires alternative investments. The best options for generating sustainable returns in the future are these investments. Strategies aid in portfolio diversification, but it takes time to comprehend portfolio diversification through alternative investments, including liquidity, industry, risk level, and market trends. This information will assist everyone in making better decisions that reduce the overall risk of the portfolio while maximizing returns.

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How to choose the right mutual fund services for your investment goals?

April 12, 2023

Investing in mutual funds can be a good option to reach your long-term financial goals. You can achieve your financial goals, such as retirement, child education, buying a house, taking a foreign trip, or buying a car. Investing in mutual funds is one of the popular methods in India to reach the desired objective. There are a few tips you can use while investing in mutual funds.

What are those? Let us explore in this blog.

Things to keep in mind while choosing a mutual fund. Here are a few key points that every investor should keep in mind whenever they think about investing in a mutual fund:

  1. Determine your financial goals

The most important aspect of creating an investment plan is defining various financial goals. You should lay out all of your goals at different stages of life, taking inflation into account, so that you have an actionable plan, such as how much and where to invest and for how long! Once these are complete, you should consider how to select mutual funds solutions that will help you meet these goals.

  1. Determine your risk tolerance

Your risk tolerance is the second most important factor to consider when selecting a mutual fund. Risk is defined as an unfavourable financial outcome in comparison to your expectations. Some people are more willing to take risks than others. Your risk tolerance is determined by your age, stage of life, and personal and financial situation. If you can accurately assess your risk, you will be able to select a mutual fund based on your risk tolerance.

  1. Asset allocation

Different asset classes have different risk profiles; for example, debt funds are typically less risky than equity funds. You should understand that risk and return are inextricably linked. Asset allocation seeks to achieve your financial objectives by balancing risk and return. If your risk tolerance is higher, you can allocate more to equities, and vice versa. You should invest in the appropriate asset class based on your financial goals and risk tolerance, and to do so, you must understand how to select the appropriate mutual fund service.

  1. Diversification

Diversification is important when it comes to minimising the risk and maximising returns in the long term. It is advisable for you that you don’t put all your eggs in one basket. Invest in different sectors to diversify your portfolio.

  1. Taxation

Taxation is one of the most important criteria to consider when determining how to choose a good mutual fund because you must understand the tax implications of your investments before you begin.

  1. Fund Manager’s Track Record

You should check the long term track record of the scheme, its fund manager, and also the fund house before investing. An unprofessional fund manager could become a hurdle in order to achieve your financial goals.

Conclusion  

Take your time to research and analyse these factors before deciding to invest in mutual funds solutions. You should choose a fund that aligns with your financial goals, but you need to remember one thing: mutual funds are a long-term commitment. 

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The Rise of Alternative Investment Funds in India

April 10, 2023

Over the past few years, Alternative Investments are gaining popularity in India. Any investment that is not in a traditional asset class, such as stocks, bonds, or cash, is considered an alternative investment. These include real estate, hedge funds, and private equity. Alternative investments have the potential to expand quickly in the future, despite the fact that the trend is still in its early stages in India.

The country’s economic growth is one of the primary reasons for AIFs rising popularity in India. Investors are looking for new growth opportunities to diversify their portfolios and take advantage of the country’s economic growth. Alternate investments offer exposure to different asset classes and sectors that are not available in traditional investments. 

In this blog, we’ll take you through the rise of alternative investments in India. 

According to a report, the total amount of investments made through AIFs will increase at a 25% CAGR between 2022 and 2025, driven by wealth managers who offer AIF products as alternatives to high net worth individuals (HNIs), family offices, and insurance companies. 

Why are AIFs gaining popularity?

One of the main reasons AIFs have become popular in India is the fact that alternative investments help investors to manage their risk and diversify their portfolios. AIFs provide some special investment opportunities that conventional investments do not, which can aid the investors to get higher returns. 

The two alternative investment options that are most popular in India are private equity and venture capital. While venture capital funds invest in start-ups and early-stage businesses, private equity funds invest in privately held businesses that are not listed on the stock exchange. These two investment choices both have a sizable potential for high returns, but they also carry a higher level of risk.

Benefits of Alternative Investments

Another aspect is that AIFs are also popular among the Indian market due to their benefits. Let’s discuss the benefits of Alternative Investments in brief: –  

Lower Volatility:

Including alternatives in a portfolio can help to reduce volatility, offer greater diversification, and boost returns because they frequently behave differently while comparing to conventional equity and bond investments.

Wider Diversification:

Alternatives can be a good way to diversify your portfolio because they have low correlation to conventional asset classes.

Returns:

Thanks to a wider range of investments and strategies, alternative investments can improve the risk and return profile of a portfolio. 

Conclusion

To sum up, AIFs are becoming more and more popular in India because they give investors a special chance to diversify their portfolios and control their risk. Private equity and venture capital, the two most prominent types of AIFs, provide high returns but also involve a high degree of risk. As the nation’s economic growth prospects improve, alternate investment funds are anticipated to expand steadily.

You can visit our page on the website to know more about AIFs. 

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