Investment Options for HNIs, Syndicates in the Unlisted Space
Murali Loganathan Director, Research, PrivateCircle.co, 0
The number of HNIs and Ultra HNIs in India has been rising for the past few years. Even a conservative estimate of the number of billionaires puts India third on the global list. These individuals have a high investible surplus in the range of millions of dollars. HNIs also have their usual income flows adding to their corpus regularly. Therefore they are a target for several services like dedicated wealth managers, and portfolio managers.
HNIs are regularly presented with dedicated options to invest and grow their wealth further, ranging from high-end real estate deals to luxury cars to art and other businesses. These are tailor-made for each HNI according to their preferences, with service providers taking a considerable fee for such specialised services.
HNIs are generally wary of such advice coming their way, primarily based on how they value wealth and what they believe are productive ways to grow it further over the long term.
HNI investments are generally not prioritized for liquidity. This flexibility to hold investments without liquidity for considerable periods is a superpower. Every investment is held till a great deal comes their way to book profits, usually in multiples of the original investment.
Typically, HNIs are self-made from the businesses that they have promoted and invested in their lifetime. These investments over time have become sustainable and do not require their continuous attention to operate and grow. Due to their own experience, they also hold a sense of respect for others who are building businesses and creating wealth in the process. HNIs, therefore, are willing to support such businesses, especially those in the unlisted space that show impressive potential to grow.
HNI Commitments in the Unlisted Sector
Our recent analyses at PrivateCircle.co, covering 10 years we noticed that many angel investors have committed for the long term and maintained their equity ownership in unlisted private companies through both good and bad times.
As an investor type, startup founders prefer having HNIs in their cap table, due to two reasons,
1.They are not as demanding as institutional investors like VC/PE, and
2.They can add more value to the startup both from their experience and through their network.
It comes as no surprise that most startup deals today feature angel investors.
Considering both the demand from HNI to invest in unlisted companies and the supply of great companies
that match the interest of HNIs, there is a sizable investment opportunity.
Tech Savvy Investment Services for HNIs
Today wealth managers and syndicates are limited in their ability to continuously provide promising investment opportunities to HNIs from the unlisted markets. This limitation is due to a lack of intelligence about the entire unlisted universe where opportunities can come from surprising places. HNIs in India are better off relying on intelligence about companies they want to invest in, without solicitation and equipped to make their decisions independently. HNIs should therefore take steps to acquire such intelligence that will allow them to continuously uncover relevant opportunities, based on their sectoral interest and investment history. The wealth advisors should also be helping the HNIs get liquidity if the objectives of investments are already met.
Syndicate platforms are today struggling with similar problems.
1.Syndicates are limited in their ability to continuously source good deals to the ability of members.
2.The syndicate may have high carry and fees, eating away returns that could potentially come to the HNI.
3.These syndicates may not have the option to allow HNIs to upsize their bets based on their beliefs in the potential performance of the startup.
HNI services must not end with just surfacing great opportunities, but should include providing help in closing transactions, help in regulatory and tax compliances and help for exit in the future as needed at the right price and returns.
Each of these services is only now beginning to be technology-enabled, making it convenient across the entire lifecycle of investing for HNIs. In India, robotic wealth advisory, digital transformation of high-value investing, and sourcing companies from deep intelligence by employing technology in unlisted markets are slowly becoming more widely available. These developments enable HNIs to make independent investment decisions and make it easier to be engaged with the ecosystem seamlessly.
In the history of independent India, these will provide a truly self-serving way for HNIs to give back to the startup community and reinforce the growth mindset by supporting entrepreneurship. HNIs do understand this and can support a new generation of founders. Moreover, going independent provides HNIs to build lifelong relationships with new-age entrepreneurs who are starting to build strong foundations for successful future businesses. These relationships will benefit both sides.
The entrepreneurs are gaining from the advice of HNIs grounded in experience, while the HNIs are reverse mentored on the newer-tech savvy ways of building out modern businesses.
Tech Savvy Investment Services for HNIs
Today wealth managers and syndicates are limited in their ability to continuously provide promising investment opportunities to HNIs from the unlisted markets. This limitation is due to a lack of intelligence about the entire unlisted universe where opportunities can come from surprising places. HNIs in India are better off relying on intelligence about companies they want to invest in, without solicitation and equipped to make their decisions independently. HNIs should therefore take steps to acquire such intelligence that will allow them to continuously uncover relevant opportunities, based on their sectoral interest and investment history. The wealth advisors should also be helping the HNIs get liquidity if the objectives of investments are already met.
The entrepreneurs are gaining from the advice of HNIs grounded in experience, while the HNIs are reverse mentored on the newer-tech savvy ways of building out modern businesses
Syndicate platforms are today struggling with similar problems.
1.Syndicates are limited in their ability to continuously source good deals to the ability of members.
2.The syndicate may have high carry and fees, eating away returns that could potentially come to the HNI.
3.These syndicates may not have the option to allow HNIs to upsize their bets based on their beliefs in the potential performance of the startup.
HNI services must not end with just surfacing great opportunities, but should include providing help in closing transactions, help in regulatory and tax compliances and help for exit in the future as needed at the right price and returns.
Each of these services is only now beginning to be technology-enabled, making it convenient across the entire lifecycle of investing for HNIs. In India, robotic wealth advisory, digital transformation of high-value investing, and sourcing companies from deep intelligence by employing technology in unlisted markets are slowly becoming more widely available. These developments enable HNIs to make independent investment decisions and make it easier to be engaged with the ecosystem seamlessly.
In the history of independent India, these will provide a truly self-serving way for HNIs to give back to the startup community and reinforce the growth mindset by supporting entrepreneurship. HNIs do understand this and can support a new generation of founders. Moreover, going independent provides HNIs to build lifelong relationships with new-age entrepreneurs who are starting to build strong foundations for successful future businesses. These relationships will benefit both sides.
The entrepreneurs are gaining from the advice of HNIs grounded in experience, while the HNIs are reverse mentored on the newer-tech savvy ways of building out modern businesses.