Family offices diversifying into global equities, private equity: Report

India's Family Offices: A Global Transformation

India's family office landscape is undergoing a dramatic shift, evolving from a primary focus on wealth preservation to a dynamic, globally-oriented ecosystem.

A recent report by EY-Julius Baer reveals a fascinating trend: while wealth preservation remains a cornerstone for 25% of Indian family offices, a significant majority are actively diversifying their investment strategies. This diversification extends beyond traditional assets to encompass:

• Global Equities: Expanding investment horizons beyond domestic markets.
• Real Estate: Capitalizing on international property markets.
• Private Equity & Venture Capital: Seeking higher returns through private investments.
• Alternative Investments: Exploring a wider range of asset classes for diversification.

This evolution is fueled by several key factors:

• Growth in Numbers: The number of family offices in India has skyrocketed from 45 in 2018 to over 300 today, indicating a maturing and increasingly sophisticated market.
• Global Expansion of UHNIs: Ultra-high-net-worth individuals (UHNIs) are increasingly investing internationally, leveraging the Liberalised Remittance Scheme (LRS), with remittances soaring from $18.8 billion in 2019-20 to $31.7 billion in 2023-24.
• Enhanced Governance & Succession Planning: A growing emphasis on formalizing governance structures and developing comprehensive succession plans is evident, although significant room for improvement remains. While 59% have wills or constitutions, and 19% utilize trusts or LLPs, a substantial number lack a complete succession strategy.

Challenges and Opportunities:

• Private Market Adoption: Private equity and venture capital investments remain relatively limited, with 57% of family offices allocating less than 10% of their portfolios to these asset classes.
• Regulatory Navigating: Regulatory complexities, particularly concerning changing tax laws (48% of respondents) and cross-border regulations (37% of respondents), pose significant challenges.

Looking Ahead:

The future of Indian family offices is characterized by:

• Increased Cross-border Investments: A global outlook driving international investment strategies.
• Leveraging GIFT City: Utilizing the Gujarat International Finance Tec-City (GIFT City) as a hub for international financial transactions.
• ESG Focus: Growing interest in Environmental, Social, and Governance (ESG) factors influencing investment decisions.
• Hybrid Models: Adoption of hybrid models combining in-house teams with external experts for enhanced agility and expertise.

Surabhi Marwah, Co-leader, Private Tax and Partner, EY India, summarizes the transformation: "The Indian family office ecosystem is at an inflection point. Wealth preservation alone is insufficient. Families now prioritize efficiency, transparency, and global access, necessitating a more structured approach. Successfully navigating tax and cross-border regulatory frameworks is crucial for their future success."