PEAKLIFE

By Adrija Agarwal

The global family office landscape, including that in India, is undergoing a fascinating transformation. As guardians of multigenerational wealth, family offices have often relied on trusted advisors and traditional investment avenues to ensure long-term stability. However, with factors like the growing base of high-net-worth individuals (HNIs) and ultra-high-net-worth individuals (UHNIs), progressive economic policies, technological advancements and globalisation, the investment management landscape in India has taken significant strides.

Echoing this shift, the traditional family office ecosystem is on an interesting cusp, with the next generation pushing the boundaries beyond legacy assets.

Redefining Investment Approach and Diversification into New-age Asset Classes

Traditionally, family offices in India focused on a core set of assets, like real estate, which provided both stability and security. However, the new guard recognises the limitations of this approach. Today’s digitally native generation comes with an increased appetite for calculated risks and accelerating profits. There is a surge in the exploration of a wider and more diverse set of asset classes. The spectrum has expanded beyond real estate, fixed deposits and gold to equity, startups, and even cool new D2C brands.

The public equity markets, debt funds, mutual funds and even alternative investments like Venture Capital (VC) and Private Equity (PE) are now on the radar as they are showing substantial and promising growth compared to traditional avenues that lock in large amounts of capital for longer terms with limited fixed percentage returns.

The immense potential of India’s booming startup ecosystem is hardly unnoticed. Young, innovative companies are disrupting industries and creating entirely new ones. By backing these ventures, family offices are not just chasing returns; they are providing much-needed strategic support in addition to patient capital, thereby navigating the venture towards a sustainable growth trajectory and actively contributing to India’s economic transformation.

With growing awareness around sustainability, family offices too are favouring companies demonstrating best practices in areas of social and environmental impact, thereby reshaping the idea of real wealth creation.

New-age technologies like AI are gaining momentum and the scope for more family offices to fuel the growth trajectories of tech companies, fintech brands, data centres, and energy infrastructure looks exciting too.

Leveraging the Power of Generation Dynamics

The shift towards new asset classes wouldn’t be possible without the invaluable guidance of the former generation. With experience in managing wealth and expertise to gauge the financial viability of an investment, the first generation provides a crucial anchor in the increasingly dynamic investment landscape. They bring a vision, provide a perspective on the importance of culture-driven businesses and provide the wisdom to withstand and navigate market fluctuations to ensure sustained growth.

There is an added advantage for companies that family offices invest in, as the long-term approach of these institutional family offices can help predict and take into account future trends and prospects.

The younger generation, on the other hand, provides much-needed tech- savvy and a nuanced understanding of new-age processes and valuation tools. Comfortable with navigating the complexities of the digital world, they possess a natural drive to innovate. They also have a better understanding of emerging sectors and industries.

The fusion of experience and young energy creates a winning formula for successful investment strategies and building a more diversified and resilient portfolio.

Take, for instance, that a family office is looking to invest in a company. The senior generation’s understanding of traditional financial metrics will remain essential. They will drive questions and conversations regarding the company’s performance, experience and principles. They will bring a steady hand to the table, breaking down the complex balance sheets to understand how the business is actually doing.

On the other hand, the younger generation can complement this by analysing a company’s online presence, decoding customer engagement metrics, simplifying modern-day jargon, and better understanding and addressing the needs of the target audience.

This multi-pronged approach helps in piecing together a more holistic picture of a company’s health. (And the bottom line! Simply put, this way, they both get a better idea of how healthy the company really is, not just the numbers on paper.

In conclusion, intergenerational partnership is not just about managing wealth; it’s about creating a legacy of innovation and growth for generations to come. And the evolution of Indian family offices and wealth management makes a great study in this case.