‘Allocate assets depending on your risk appetite’

This is not the time to invest in international funds: Edelweiss executive Seemant Shukla

With Edelweiss Wealth Management all set to launch its new ‘Crossover Opportunities Fund II’, which aims to capitalise on the returns from investing in unlisted companies, BusinessLine spoke to Seemant Shukla, Senior Vice-President, Edelweiss Personal Wealth Advisory, to understand the fund’s strategy and the fund house’s take on the current market conditions. Excerpts:

How will the crossover fund benefit investors?

It is an alternative investment fund that aims to invest in companies that are at a ‘crossover’ point, i.e., from an unlisted to a listed company, in the near term. The strategy is to invest in companies that provide such crossover opportunities; companies that are likely to soon have access to public markets.

What sectors do you find ripe for investments?

There is no specific strategy behind it. It all comes down to selection of companies.

When it comes to our new fund, I’m limited by the kind of companies I can look at, because my universe is not any company; my universe is only those companies looking to go into IPO. That’s where our selection comes in. Every year, 40-50 companies go into IPO; my selection will be 10-12 companies. This year, out of the 15-20 companies that have come for IPO, we have invested only in three or four.

Given the current market conditions, in which asset class do you see more fund flow?

Based on the industry data we have received so far, I think SIPs (systematic investment plans) are still intact and growing. I will not say equity fund flow has reduced drastically. However, lump-sum equity is subdued. Some correction that we have seen in mid- and small-caps might have triggered the dip.

On the other hand, ETFs (exchange-traded funds) are doing well, mainly due to the institutional money that is coming in.

A lot of action can be seen on the debt side and FMPs (fixed maturity plans), too. Two things could have mainly triggered this increased flow. One, FMP is more like a FD return; you are in for a long haul, and fund managers don’t have the pressure to sell it. Two, the yield has inched up across rated securities — AA, AAA and G-Secs.

Your thoughts on alternative investments…

Currently, there are over 300 registered AIFs (alternative investment funds), and HNIs (high net worth individuals) are looking for something unique.

AIFs are the best platforms in terms of asset management as they give the highest amount of flexibility. Funds could be invested across unlisted and listed spaces, and so on.

What is your advice on gold and real estate as investment options?

We think that investors should focus on asset allocation depending on their profiles and risk appetite. Indian investors have historically had higher exposure to real estate in their portfolios. This needs to be balanced with a larger allocation to financial assets such as bonds, MFs and AIFs. Gold should be a part of asset allocation to the tune of 5-8 per cent in the form of gold ETFs or gold bonds.

Do HNIs in India prefer alternative investments on a large scale?

In the recent past, HNIs have shown a lot of interest in AIFs. AIF platforms have greater flexibility; HNIs have avenues beyond the traditional options to invest and grow their wealth. This has helped build HNI interest.

Do HNIs in India favour investment options such as wines, paintings and other art forms?

There isn’t much interest as there is paucity in terms of the platforms available to invest.

Given rupee’s decline in the recent months, is there an added incentive for HNIs to invest overseas?

This is not the right time to invest in international funds or fund-of-funds. Investing as part of geo-diversification or for certain goals that require asset growth in dollar terms would be a good idea.

 

(With inputs from Pranav Parikh, Head - Edelweiss Private Equity)

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