Equity markets continue to remain unsustainable and the yields of maturity (YTM) in credit instruments are not in line with inflation (CPI) levels, identified by 5.52 percent as of March 2021. Not surprisingly, many wealthy investors are looking for customized investment solutions where they can make adjustments. without problems. Cue: other legacy classes.
The umbrella term for ‘unique goods’ includes everything from professional handbags and private equations to something that can be predicted such as art, collections, jewelry or fine wine.
The options we will examine are at the edge of the spectrum. Such assets can be held privately or publicly, providing some sort of variation from traditional options, having a clear investment mandate and managing volatility.
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REITs and InvITs
Real Estate Investment Tr trusts (REITs) and Investment Investment Trusts (InvITs) are already the most profitable credit instruments. These trusts operate in the same way as shared funds operate. However, REIT’s basic assets are real estate in place of shares or bonds, and infrastructure projects such as roads, highways, transmission lines and InvIT power lines.
Instead of being exposed to a single asset, REIT allows investors to acquire less ownership in a crowd of high-quality tax-paying properties, while InvITs provide access to long-term, income-generating assets.
Cash flow generated from investment in rental / working income and interest income is still distributed as a share to investors. While the initial yield is between 6 percent and 8 percent, as rental income and growth increases, expectations could rise anywhere between 11 percent and 14 percent.
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Alternative Investment Funds (AIFs)
AIFs are privately owned investment vehicles that do not fall under the SEBI rules. However, they need a certificate to operate as a unit. Depending on the investment mandate, AIFs can operate under three broad categories – I, II and III.
Category I: Venture Capital Funds, SMEs or infrastructure funds, public participation funds (ESG), etc.
Category II: PE funds, REIT, loan funds or fund.
Phase III: Hedge funds or open funds using complex trading strategies.
Phase I and II fees can be closed for at least three years, while Phase III fees are open, and tax laws also vary from one category to another.
AIFs provide the opportunity to diversify into categories of non-traditional assets or to pursue a specific investment strategy. However, the small investment limit of Rs 1 crore per investor makes a very special club to join. To date, there are more than 500 AIFs registered with SEBI, each with a different investment theme and strategies, with annual returns of up to 30 percent.
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Offshore investments
Increased foreign exchange reserves to $ 250,000 (fiscal year) under the Liberalized Remittance Scheme (LRS) program give investors the opportunity to build a diverse international portfolio and prevent domestic instability through ‘unrelated’ asset classes. They evaluate everything from direct trust, shared funds and ETFs to immovable assets.
Investing in publicly listed options is possible in a variety of ways with platforms in the stock market and feeder funds of Indian AMCs. Many wealthy families are also looking for an opportunity to lay the foundation for another country as some real estate agencies and even countries offer investment investment options that include residency or citizenship. In addition, this is an effective option for those who want to send their children to universities abroad.
Attractive returns, clear investment policies, tax breaks and restitution benefits are some of the reasons why maritime investment is so hot.
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Be in the know
As most domestic alternative asset choices tend to be illiquid and relatively unregulated, investors need to conduct extensive due diligence and should ideally limit their exposure to 10 percent of the overall portfolio. When used strategically, alternative assets can be used as a tool to create wealth by growing capital, generating income or enhancing a portfolio’s risk-adjusted return.
