Real Estate and Infrastructure PE funds worthwhile

August 4, 2009	(Be the first to rate this story!)  Loading ...
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With risk appetite of high net worth customers increasing, wealth managers are recommending private equity investment of 5-10 per cent of one’s portfolio with special focus on real estate and infrastructure sectors. The ticket size of such investment varies between Rs.10 lakh and Rs.25 lakh, depending on customer’s risk profile.

Managers expect to generate returns of 18-25 per cent CAGR on such investments. HNIs earlier refused to take wealth managers’ call to invest in PE funds. The current market rally supported by better than expected Q1 results and positive global cues has now prompted HNIs to take higher risk and take to PE investments.

“Discerning customers who foresee stability in global economy coming are currently looking at India and China. They expect both the countries to participate in the recovery first. If this is a year of consolidation, there is also a little bit of optimism that results in higher risk appetite,” mentioned Vikas Agnihotri, CEO, Religare Macquarie Private Wealth.

“Supported by improved sentiment on the back of equity market rally, interest in PE is picking up. What work in favour of PE deals are the cheaper valuations available as compared to 2008,” said Shiv Gupta, head of Private Banking, ABN AMRO India.

Wealth managers are identifying real estate and infrastructure PE funds worthwhile for investment in addition to education and healthcare that are considered to be recession proof. They are however recommending such funds only to moderately aggressive investors to very aggressive investors with a lock-in period of 3-7 years. Two major criteria before such recommendations are higher risk appetite and liquidity of a ‘matured’ investor who according to the yardsticks set by wealth advisories has to have total assets of around Rs. 2.5 crore to Rs 5 crore.

Underscoring the demand potential of real estate sector Rajesh Saluja, CEO, ASK Wealth Advisors, said, “counter cyclical opportunities are available in this sector. There is a requirement of 27 billon housing in India and whereas only 3/4 billion are existing. Prices have corrected to reasonable levels. Time is ripe to invest in PE funds in residential housings.”

Price corrections have also helped PE investors to negotiate with the cash strapped developers and the returns are good.

In March, ASK launched a 500 crore real estate fund to supplement its exiting wealth management business. According to industry sources, Religare Macquarie might take exposure in ASK Real Estate Fund. Further, Religare Macquarie itself runs a PE fund on education and healthcare in association with Mileston Capital Advisors.

The wealth management arm of ABN AMRO is currently eying IDFC Infrastructure Fund, sources said. However, ABN’s Gupta refused to comment. Wealth managers from Karvy Private Wealth, wealth management - Axis Bank too are advocating for PE investment in infrastructure and growth focused PE funds.

Hrishikesh Parandekar, CEO, Karvy Private Wealth, said: “We are looking at largely domestic funds on infrastructure sector and growth focused PE funds. We are in touch with investment bankers to track good PE investment opportunities.”

“HNIs who were averse to taking any risk through PE investment, are now willing to listen to our recommendations,” said Sonu Bhasin, President – Retail Financing Services, who also heads wealth management.

News Published Under:   Real Estate India, Banking and Finance |

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