High Net Worth investors go global

The 'World Wealth Report 2013' highlighted that in the Asia Pacific region, India recorded a 22.2 per cent growth in the number of high net worth individuals (HNWIs; defined as with a net worth of $30 million or above) in 2012, second only to Hong Kong. There has been a steady rise in India's HNWI population over the past few years and this rise is predicted to continue, particularly as equity markets improve.There are 7,730 HNWIs in India, with a total wealth of $925 billion. India boasted 122 billionaires in India in 2012, according to the property firm Knight Frank - a significant increase from 2011.Consultancy firm Capgemini finds that the HNWI population in India is notoriously volatile, with 18 per cent fewer among its number that year compared to 2010. Hong Kong lost a similar proportion.With almost 90 per cent of Indian businesses being family run, private wealth planning in India has always had special significance due to the promoter-driven nature of the economy.As the families have grown, they are ′going global′. Others are consolidating their asset bases in India and focusing more on stewardship of those assets for future generations.Newer generations which are better educated and have gained greater exposure to the US and Europe are becoming more savvy about private wealth planning. There have been some highly publicised family feuds, due to inter-generational conflict and a patriarchal family structure.The impact of the financial crisis on equity markets caused Indian HNWIs to look towards fixed income markets as well as alternative investments, such as art. Christie's first auction in India in December 2013 totalled Rs 96,59,37,500 ($15,455,000), doubling pre-sale expectations and selling 98 per cent by lot. HNWIs in other emerging markets, especially China, allocate much more of their portfolio into art.Structured products, which can offer principal protection, have also been popular alternate assets, according to Mumbai-based Karvy Wealth Management.In comparison to laws governing planning for commercial ventures, laws which impact private wealth planning are still immature. India does not have inheritance or death taxes, estate duty or gift tax, for example. To develop this market, and to educate clients, an institutional framework needs to be built, particularly dealing with inter-generational wealth transfer. The coming years may see a greater focus on special purpose vehicles such as trusts, traditionally unpopular in India, as a result of new corporate social responsibility (CSR) provisions in the Companies Act 2013.The above article was published in India Inc′s print edition of the India Investment Journal launched in April 2014 in conjunction with the Global Wealth Management Conclave 2014.