Top 5 investment options for HNIs

Portfolio Management Schemes: Investment into Portfolio Management Schemes (PMS) can be one of the first options to consider for a HNI. PMS schemes have more flexibility in managing client funds and can also be personalized to the requirements of an investor. They can take concentrated bets and one can choose a niche fund manager to invest into small caps. However, one needs to be aware of the higher risk that some of these funds would entail and hence can be considered for a part of one’s equity exposure. PMS schemes come with a minimum investment requirement of Rs 50L.

Alternative investments: In recent years, Alternative Investment Funds (AIF) have become popular and have drawn HNIs’ attention in a big way. There are many reasons for it: the main reason being that it gives them the option to diversify investment with a low correlation to other asset classes. It gives them appropriate diversification with a chance of earning higher returns. It is essential to mention that, in general, the minimum investment for AIFs is around Rs 1 crore. Hence, they are suited for HNIs. These funds are managed by skilled and professional fund managers who understand the financial needs of HNIs, and they work towards fulfilling them. If you are looking for the right AIF option, you can get in touch with our experts at Right Horizons.

Real Estate Funds/Commercial Real Estate: A HNI can invest in Real Estate Funds from AIFs or into REITs that are listed on the stock exchange. After an extended period of weak returns, the real estate market is likely to pick up. HNIs can also consider commercial real estate as an investment option. Commercial real estate investment has emerged as a preferred destination for HNIs. It is because commercial real estate offers higher yields (on average) compared to residential real estate. Commercial real estate includes office spaces but also shopping centers and warehouses. One can also invest into rental yielding serviced apartments or co living spaces.

Market Linked Debentures (MLDs): These offer index-linked returns and generally follow benchmark indices like the gold index, government yield, equity index, bonds, etc. It allows investors to gain exposure to certain market segments and avoid the risk of direct exposure to an asset. These are ideal investment options for HNIs when the market is volatile or when investors expect volatility in a future period.

Angel Investing/ Unlisted Equity: One can also consider investing in early stage companies (Angel Investing). One can participate in Angel networks that bring across such opportunities. Keep in mind that it is important to diversify your angel investments across at least 8-10 companies so as to manage the higher risk that these investments come with. One can also support some of these entrepreneurs with inputs and contacts which can be a way for HNIs to give back to society. Depending on the size of one’s capital, one can also invest into later stage opportunities requiring higher capital outlays.

There is a wide gamut of options available with HNIs today, who have a higher capital to invest into. These options can be considered by them for investing to provide diversification and also enhanced returns. However, it is important to keep in mind that the environment is dynamic, with significant uncertainty and volatility. It is important to have a strong foundation of debt, equity and gold. At the next level, one can consider PMS schemes to provide higher returns with higher ticket sizes. HNI investors can then look to invest into the more exotic opportunities while capping the exposure based on the risk level of the option.