Indian families looking to diversify investment abroad 

diversify investment

A high percentage of Indian investors are significantly biased toward Indian investments when investing their wealth. Recently, however, ultra-high net worth individuals in India have been looking to diversify their wealth by investing abroad. High net worth individuals in India are looking for safer and easier means to diversify their wealth. With uncertainty around healthcare, particularly due to the pandemic, and the stronger tax rules recently imposed, many affluent Indians are moving abroad to provide a better life for their families and a more stable outlook for their financial investments. The independent wealth advisory firm Avestar Capital is one firm helping investors build a diversified global portfolio. 

Xerxes Mullan, the Founding Partner at Avestar Capital has a keen understanding and knowledge about the Indian investor, owing to his Indian roots. Along with his expertise, he brings in years of experience as a former Managing Director- Investments at the Private Banking and Investment Group at Merrill Lynch. Xerxes has also previously worked at Goldman Sachs & Co. which further adds to his years of industry knowledge. He has built Avestar Capital as a modern, global financial advisory platform that is focused on the entrepreneur. The need for comprehensive advice and solutions on integrating and simplifying complex global balance sheets is the one that Avestar primarily addresses. 

Under the changed law, Indians living overseas earning Rs.15 lakh and above on fixed deposits, dividends and rent from India, will have to pay tax on what they earn outside of India if that global income is not taxed in any other country. This has resulted in a further push for upper-class Indians to diversify their wealth more effectively. Easier access to the rest of the world, particularly to the UK and US, enables greater business opportunities. It is vital to invest in a reputable and trusted programme, like Avestar Capital.. Due diligence is at the forefront of this to ensure that only reputable investors are allowed into the country. 

While the appetite for international investments from Indian investors is steadily growing, less than 0.1% of Indian wealth is parked abroad. This is a stark contrast as compared to developed countries where 10-20% of the wealth is invested internationally. This indicates the immense potential and a huge market for financial services that can cater to this set of Indian individuals. A surge in international investing by high net-worth individuals (HNIs) is pushing family offices in India to enter into foreign partnerships to deliver advice on investing in global markets. 

An amalgamation of various factors has triggered a keen interest among Indian residents to invest in global securities, especially during the pandemic. A spectacular growth in new-age companies, as well as diversification of assets, are some of these factors. Investors have also invested in the success of familiar platforms that they use on a day-to-day basis such as Google, Amazon or Facebook. The ultra-high net worth individuals, especially, have also been foraying into property options overseas as compared to property investments in India itself. Instead of putting all their eggs in one basket, Indian investors are looking at global, more lucrative markets. A globally diversified fund will also in the long-term give a more diversified exposure. 

“There is remarkable merit in diversifying the investment portfolio beyond local markets”, says Xerxes Mullan, the Founding Partner of Avestar Capital. More than 98% of Indian investors choose to invest in domestic markets. On the other hand, US-based investors tend to invest almost 27% in international markets while those in the UK invest about 50% of their investments overseas. 

Avestar Capital is a global and independent firm that ensures open architecture, sound financial advice, a large network of professionals and they function as trusted service partners to the clients. Avestar Capital provides integrated advice on the various aspects of financial, estate and tax planning along with investments. Tech augmented financial services help with a digital vault and comprehensive reporting to the clients. 

Avestar Capital foresees this as a large part of wealth management going forward. While investments abroad are constantly evolving and are highly nuanced, sophisticated Indian investors should consider it as a critical step in ensuring a well-rounded portfolio. It enables access to similar global opportunities as are available to their international counterparts, further allowing them to grow their wealth. 

Should Indians follow suit and allocate more to global assets? We believe yes, and here are the main reasons why this is the need of the hour:

  1. Expand participation in global prosperity, wealth creation and innovation
  2. Minimize wealth concentration risk
  3. Battle currency depreciation
  4. Portfolio and currency diversification
  5. Alignment with global lifestyle
  6. Build a safer investment portfolio

Choosing the right offshore solution is one key to building a diversified global portfolio. The crucial factors one should consider in the process of building a global portfolio include:

  1. Investment manager selection
  2. Vehicle and jurisdiction used for investments
  3. Safety, liquidity and quality
  4. Regulations, tax and compliance
  5. Costs and interest alignment
  6. Ease of execution, servicing, monitoring and reporting