- 18% of the wealth of UHNIs is being allocated to private market investments by their family offices.
- They prefer seed investments owing to quality top management, the presence of a strong business moat and high growth market opportunity.
- Fintech, enterprise tech, consumer tech, healthcare, edtech and agritech were the top sectors of choice.
18% of the overall allocation of the wealth of a new category of first-generation high-net-worth individuals (UHNIs) is being allocated to private market instruments as VC funds and investments in startups. Thanks to the changing face of the startup ecosystem with the spate of initial public offerings and acquisitions.
According to the Private Market Monitor, which is a survey of over 100 family offices and UHNIs launched by trica in partnership with AZB & Partners and EY, UHNIs are proactively exploring the family office route to manage their wealth.
“Private market investments remain the alternative investment of choice with allocations to startups and VC (venture capital) funds comprising 18 per cent of the overall pie,” it said.
There is a growing importance of startup investments. An allocation of 18% is quite aggressive when compared to a 15 per cent allocation to other alternatives (real estate, infrastructure, art, etc.), 20 per cent allocated to fixed income and 36 per cent to listed equities.
The top factors investors evaluated to make direct startup investments were quality of top management, high growth market opportunity and the presence of a strong business moat.
Moreover, over 83 per cent of family offices have an allocation to private markets which is over 10 per cent of their overall asset distribution; and this number has been steadily increasing over the past five years for 50 per cent of the respondents and has doubled for 40 per cent of the participants.
Around 50 per cent of family offices surveyed preferred the seed to Series A stage to enter a startup investment, 40 per cent preferred late to pre-IPO transactions while 25 per cent stated a preference for having a well-distributed portfolio across stages.
Fintech (82 per cent) and enterprise tech (71 per cent) were the top two sectors of choice by a clear majority, followed by other sectors such as consumer tech (68 per cent), healthcare (50 per cent), agritech (35 per cent), edtech (42 per cent).
Nimesh Kampani, Co-founder and CEO of trica said, “The rapid expansion of UHNIs and family offices in India coupled with the positive exit scenario for startup investments in the last year has led to a growing appetite among investors to more actively manage their private market portfolios.”
Trica is a LetsVenture company that creates software products for equity management and transactions. LetsVenture, founded in 2013, is a platform for startup investments with 7000+ angel investors, a portfolio value of over USD 3 billion and an Angel AIF (alternative investment fund) with an asset under management of over USD 64 million.
Family Offices provide various services that are tailored to meet the needs of high-net-worth individuals (HNWIs). They have a dedicated team of specialists that serve clients with respect to investment management, charity, management of assets, as well as non-financial issues such as private schooling, household as well as travel arrangements.
Investment in private markets refers to investments that are made in equity and debt of privately-owned companies, with the hope that these investors will eventually be able to sell their stake through a buyout, a trade sale, a recapitalization or through an IPO.
