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Where Do Millionaires Invest? Three Key Factors Aiding Growth Of International Investing

S. Mukherjee: Good proxy of that is mutual fund feeder-fund market which has hit the cap. The cap was nowhere close, to be hit two years back. Part of it is just because US markets have done so well.

It’s been 10-15 years, since US markets have done so well.

In the last three-or-four years, the noise and visibility of some of the larger companies in the US whether it is the entire branding around FANG, whether it is the entire social-media visibility company like Tesla, all the derivative action of arc investments etc. This has osmotically oozed into Indian investor mindset as well. There is obviously a very compelling preposition here–its not only about the opportunity but also the diversification of the risk. The kind of opportunities you see globally are distinctly different from the tons of opportunities you see in India. So, it works out beautifully for portfolio and Indians have taken to it, at least the high-net-worth families. They have taken to international investing in a very enthusiastic fashion. Most of the allocations till now has been on the listed side, predominantly for obvious reasons in the US. But also little bit in emerging markets in China. There is interest across the globe. There is interest, also, in the private pockets, in very small and selective but to the extent of access available to the people. There is interest in private market transactions as well. It’s an avenue asset class that has increased interest and a compelling reason to be there in your portfolio.

R. Saluja: Three key things are driving this. They are also one of the reasons we, over the last five years, has been recommending. First, there are lot of HNI and ultra HNI client, whose children are studying abroad. So many of them may want to remain there or work there. There is a need to create assets outside the country, because there is a limit under the Liberalised Remittance Scheme law every year. Tomorrow, if they want to buy a house in London, or somewhere else, how do they put in two-three millions in one shot. So, they are building up through LRS, a portfolio outside which can be utilised.

Second, geographical diversification. Because we have seen India being an emerging market over a five-to-seven-year period. You have these two, three years that seemed, the trend, that the economy is not doing well or some government is changing or something or the other keeps happening. So you have your portfolio diversified and take advantage of some of the more stable economies.

Third is exposure to certain sectors or industries, which you don’t find replicated business models in India. So, you will not have the Googles and the Apple or Microsoft or Salesforce in any of the Indian companies. Many of our clients are very keen to take exposure to some of these really large brands. Our current advice over the last five years have been primarily equity. We have not been recommending fixed income. So, we have selected one or two really strong portfolio managers in the US who just have the same thought, philosophy and approach like us. They created 20 stock portfolios, which includes some of the best businesses available in the US. We get our clients to feed into that portfolio. That’s how we have been investing.

S. Mukherjee: The most important material is the currency. India is the high inflation country, notwithstanding our current CPI. Structurally, we are a high inflation economy, which means the rupee will keep depreciating over a longer period of time. We have seen it in the last 30 years, and we are going to see it for the next 10-15 years. Plus, we are also structurally a current account deficit country, as opposed to large parts of Asia which are current account surplus. Put both of these together and you have to do theoretical calculation of 2.5% to 3% depreciation on the rupee against the US dollar. So, it just adds on to the next layer of returns.

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