Nick Haase, Founder of Loot, once shared a simple yet profound perspective: "You only have so many hours in a day, let others make the money for you!" Though originally directed towards building a company, the same principle resonates in the realm of investing. As an individual juggling various roles with limited time, managing your hard-earned money becomes crucial alongside other responsibilities.
Investing independently, especially with a substantial corpus, can be time-consuming and challenging. From monitoring markets to staying updated on financial news and making timely decisions, it demands constant attention. Neglecting your portfolio can be a swift path to losing the wealth accumulated through years of hard work. While mutual funds offer an option, they might not cater to the unique needs of sophisticated investors.
Exploring Potent Avenues:
As investors outgrow mutual funds, the evolving financial landscape in India introduces more sophisticated options like portfolio management services (PMS) and alternative investment funds (AIFs). AIFs, unique financial instruments, extend investments beyond traditional avenues, including stocks, bonds, and cash. PMS, on the other hand, involves professional management of your portfolio by a reputable third-party entity. AIFs offer exposure to untapped assets like private equity, hedge funds, derivatives, real estate, and commodities. PMS allows investments in stocks, debt instruments, and structured products with a personalized strategy aligning with your liquidity and risk appetite.
SEBI data for 2022 reveals a 14% YoY growth in assets under management for discretionary PMS, reaching a substantial INR 22.4 trillion by December. The domestic AIF industry experienced a remarkable 105% compounded annual growth rate over the past decade, accumulating a combined AUM of INR 6.41 trillion in 2021-22. These figures underscore the increasing appeal of PMS and AIF, especially among high net-worth individuals in India seeking wealth expansion and capitalizing on untapped opportunities.
Is PMS+AIF Right for You?
Considering your investor profile is the first step. If you've explored traditional avenues and seek hyper-personalized investment options, are willing to pay for experienced wealth managers' expertise, and have a medium to long-term horizon, PMS and AIF may be the right addition to your portfolio. Allocating 15-20% of your portfolio to these avenues could be a prudent move for high net-worth individuals looking to diversify, earn high returns, and navigate a riskier scenario.
In conclusion, at this stage in your portfolio, a combination of PMS and AIF might be the optimal strategy to make your money work harder, ensuring not only savings but also substantial returns.