The Secrets of HNI Investing

One of the few things that interest regular investors is how and where High Net Worth Individuals (HNIs) invest their unlimited wealth. One thing is for sure: these HNIs are one of a kind. They range from business giants and new-age entrepreneurs who make more money to ultrarich professionals whose skills are in high demand and earn six-figure salaries. And it would be too simple to say that HNIs invest their money similarly, even though they do something similar in their commercial property investment endeavours.

Local and global wealth management industries are going through tectonic shifts because investor habits and market conditions are changing. So, a one-dimensional approach to managing private wealth is no longer enough for HNIs. In addition to carefully allocating their assets, they want financial advisors who can offer technology-focused, all-encompassing investment solutions that cover a huge range of financial services. The financial services focus on helping people keep their wealth, plan their estates and taxes, diversify their portfolios, find new ways to invest and give back to the community.

HNI wealth management will always be “customer-centric.” Still, digital financial services will affect HNI wealth management models shortly.

Source of HNI Wealth in the 21st Century

Even though they make a lot of money at work, most Indian HNIs own their own businesses. So, the sources of HNI wealth are more of a mix of inherited money from business families and new money made by entrepreneurs and professionals. It has been noticed that the younger first-generation ultra-high-net-worth individuals (UHNWIs) are risk-takers who are skilled enough to grow their wealth without losing it. They got rich through risky business ventures, so they are open to new ideas for commercial property investment in Bangalore.

The Indian investment environment is changing, enhancing liquidity. Their enterprises’ rising values have led to a record cash influx into HNI wealth management firms.

Entrepreneurs and start-ups are rising. After new-age HNI entrepreneurs sell their start-ups, a big part of their investment goes to incubating new enterprises. Several HNI wealth management businesses support entrepreneurs with this shift by matching their investment strategies with their cash flow needs.

The Revolution in HNI Investing

Wealth management professionals have seen shifts in Ultra HNIs’ investment behaviour over the previous decade. They’re investing in distressed assets, infrastructure and structured loans. They accepted portfolio leverage. Ultra HNI investors are more likely to educate themselves on investment decision-making and portfolio assessment criteria.

HNIs’ cash flow and lifestyle needs have changed, needing custom portfolios and asset allocation. Philanthropy and ESG investing are popular among HNIs in India.

HNIs have shifted from market timing to long-term wealth building. Their investing approach has shifted from pursuing short-term opportunities to maintaining and building wealth. HNIs are now receptive to new investment ideas, but only if they meet their long-term goals.

This transformation in HNIs’ investing outlook created a new asset class: seed capital, pre-IPO and growth capital. HNIs with specific domain expertise.

An increase in HNI interest in pre-IPOs and IPOs led to greater subscription levels, making IPO allocations problematic. HNIs use Alternative Investment Funds (AIF) that take pre-IPO or QIB/Anchor holdings.

Many wealth management firms quickly build up their skills to take advantage of this chance. They are putting together professional investment teams to help HNIs with early-stage investments, Venture Capital (VC) funds and new businesses.

Once the favourite investment of HNIs, real estate is now losing its shine, and HNIs are putting little or no new money into it. The process was made worse by removing cash from circulation in 2016 and starting Real Estate Investment Trusts (REITs).

Wrapping It Up

Experts in the field think HNI investments will continue focusing on the Indian market. But the depth and breadth of the Indian market need to change a lot to meet the needs of the new investors. The best ways to invest worldwide must be changed so that they work in India. Also, there needs to be a wider range of ways to invest in keeping up with the growing wealth of HNI and their growing desire for alternative investment classes.

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