Disability is a matter of perception. Or else, Sudha Chandran, Ravindra Jain, Arunima Sinha, Albert Einstein, Stephen Hawking, George Washington, Helen Keller and Franklin D. Roosevelt would never have been famous. Ahead of the International Day of Disabled Persons celebrated on December 3, let us look at investment options that disabled persons can look to secure their future.
Planning is key
Planning finances is a key task for the specially abled. This is because often investments will be required for their special needs and secured future for a longer time compared to others.
By prioritising finances and future savings, a person with one or more disability takes a definitive step to be independent. If you don’t plan properly, your disposable income will become much smaller as already quite a bit is getting spent on treatments, regular checkups and other expenditures on medical care and supervision etc.
Different avenues
Most disabled people are unaware of the investment options. There is a plethora of avenues.
Public Provident Fund and FDs – Invest in PPF and FDs in order to suit your long-term saving needs. As a disabled person, you just like others, can invest in the PPF scheme with up to Rs 1.5 lakh a year. Also, it helps in income tax redemption where they can get effective return. Those with a low risk profile, can prefer government-backed deposits.
If you can take slighlty more risk, look at pension plans, bonds, non-convertible debentures (NCDs), and equity-oriented products to generate more investment returns.
Atal Pension Yojana – This pension scheme is designed for the unorganized sector working class, but disabled can take advantage. You have to be a minimum of 18 years of age and maximum of 40 years of age. After its maturity, joinees will get minimum Rs 5,000 monthly by investing few hundred rupees per month.
Pradhan Mantri Vaya Vandana Yojana (PMVVY) – For disabled person who are senior citizens, PMVVY is a good pension plan if you are 60 years and above. The investment limit of the plan is Rs 15 lakh and senior citizens will get assured 8% return for 10 years. The minimum pension amount will be Rs 1,000 per month, Rs 3,000 per quarter, Rs 6,000 per half year and Rs 12,000 per year. Do check for PMVVY investment dates as the scheme’s last date extension for investment stands at 31st March, 2023.
Multi-cap funds – If you dont want to invest in direct equities, disabled persons can consider multi-cap funds that are diversified considering the range of stocks. Multi cap funds are a good fit for investors who can’t risk much as disabled persons. In fact, multi cap funds contain than large, mid and small-cap schemes. Disabled persons can consider hybrid funds that combine equity and debt, and offer even lower risk than multicap funds. But do look at the equity allocation of hybrid funds to cut exposure to small-cap stocks.
Health insurance – Although taking a health cover is an expense due to premium, continued medical treatment means that the handicapped people need to invest more for this insurance. Buy policies that offer specific benefits for the disabled. Study policies that cover individuals with physical challenges such as deafness, blindness, numbness and other physical disabilities like polio. Even, autism affected persons can buy special policies. Additionally, there are some government-sponsored health plans such as Nirmalya Health Insurance and Swavalamban Health Insurance.
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The recently launched RBI Retail Direct platform is a unique offering as it facilitates buying and selling of government securities by retail investors. Under this scheme, retail investors can open a gilt securities account, i.e. a Retail Direct Gilt (RDG) account directly with the RBI. Government bonds are extremely safe, and hence are low/no credit risk. The RDG account provides access to various central government and state government securities, treasury bills (T-bills) and sovereign gold bonds (SGBs). There is no cost involved, which is probably the icing on the cake. Should you go for it? Here we take a detailed look.
An account like no other
The Retail Direct Gilt account allows investors to do non-competitive bids in the primary issuance of all central government securities and those issued by various state governments. As an investor, you can see the indicative yield of the security on bidding.
As you may know, the RBI conducts auctions when the government wants to borrow. About 5 per cent of the borrowing amount is reserved for retail investors under the non-competitive bidding window. Retail can only bid the investment amount, and have no say on yield/price.
From RDG account, only one active bid will be allowed per retail client in the non-competitive portion for respective security. The minimum investment will be ₹10,000 and maximum ₹2 crore. Some 5-10% mark-up may be asked for protection against any adverse price movement.
The RDG account also provides access to secondary market trading through ‘NDS-OM’ platform — the central bank’s screen-based electronic order matching system. The retail direct investor can trade in government securities in the retail portal (odd lot segment) on this platform with minimum trading lot of ₹10,000. So far, the NDS-OM was only accessible to banks, insurance companies, foreign investors and pension funds.
Any interest or the maturity proceeds on the securities held by an investor will be credited to the bank account linked to the RDG account.
Hark! KYC beckons
All individuals can open an RDG account. As per reports, the on-boarding process is not easy. However, thankfully, the KYC can be done completely online. You can opt for offline KYC also.
To open an RDG account, you will need your PAN, Aadhaar, rupee-denomintaed savings account, email ID, mobile number, cancelled cheque and signature. After KYC is done, the login credential will be mailed to your registered mail ID within 24 hours.
Once the account is opened, you can bid and invest in the securities issued in the primary market. For secondary market access, one has to request access to NDS-OM platform.
Already, one can participate in the G-sec auction in the primary market through a demat account. ICICI Securities, HDFC Securities, Zerodha and NSE’s goBID are a few that allow investments in G-sec.
The RDG account has an edge on three aspects. First, all existing platforms do not provide access to State Development Loans (SDLs). Second, the RDG account enables trading on RBI’s NDS-OM retail segment. This is not available elsewhere. Of course, the success of the RDG account hinges on how well liquidity is improved. Three, no requirement of demat account and no cost of transacting (except payment gateway fees) compared to others is a huge positive.
If you are a Do-It-Yourself (DIY) investor, and have the skill/capacity to execute G-Sec bids, RDG account will help you avoid running expenses charged by the mutual funds. On the other hand, if you are a novice, use the mutual fund route i.e. G-Sec/gilt debt funds. This option comes loaded with fund management expertise, diversified portfolio, high liquidity (redemption) etc.
Tax matters
In terms of taxation, the RDG account/way has no edge. G-sec or gilt mutual funds have the tax edge, provided you hold the investment for three years. Debt MFs get you indexation benefit and you pay tax only on the net gains adjusted for inflation cost.
In the RDG route, the interest on bonds is taxable at your marginal slab rate, which is usually 30% plus surcharge and cess. Unless you are in a low tax bracket, G-Sec mutual funds are much more tax efficient for investors with a horizon of minimum three years.
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Category III Alternative Investment Funds (AIFs) have turned in a spirited performance in September. Among Cat-III products, Long-only AIFs, as usual, outperformed benchmarks amid a buoyant stock market. The best schemes generated 7.2â„… return, more than double of Nifty’s 2.8â„…. In the Long-short segment, returns were more staid given that the schemes take directional bets. Let us take a look at how AIFs that share data with PMS-AIF world have performed. Long-only Leading the long-only AIF pack in September was Carnelian Compounder – 1 with an impressive 7.2â„… gain. The closed-ended AIF was launched in May 2019. The AIF has a multi-cap, sector agnostic strategy, with an objective to generate sustainable alpha and compound capital over a long period of time through the MCO framework. Over last 1 year, it has given 69.8â„… gain and over last 2 years it has delivered 34.4â„… CAGR. At second place is Roha Emerging Companies Fund with another stellar 7.1â„… gain in September. The AIF was launched in 2018. The strategy invests in the equity of quality and growth-oriented companies/ business, run by competent management and available at attractive valuations. Over the last 1 year, the AIF clocked 133â„… gains. At the third slot was Alchemy Leaders of Tomorrow with 6.6â„… return in September. This AIF is focussed on investments in Listed Indian equities, Private Investment in Public Equity (“PIPESâ€) on listed Indian equities, and IPO and pre-IPO opportunities. The fund is market cap agnostic. Other notable performers in this month were Monarch MNCL Capital Compounder Fund (up 5.8â„…), Nippon India Equity Opportunity Series- 6 (up 5.7â„…), SageOne Flagship Growth 1 Fund (up 5â„…), Abakkus Emerging Opportunities Fund & Abakkus Growth Fund (both up 4.8â„…). Here is a look at long-only AIF performance in a tabulated format. Long-short
Long-short AIFs are another sub-category in the overall Cat-III AIF universe. This is a special segment, because successful management of long-short funds requires special skills and experience. Long-short portfolios are not restricted to a particular asset class and have two big advantages in the form of shorting and leverage. From an investor perspective, long-short AIFs offer a degree of consistency in returns that are not achieved in long-only peers. Hence, you may not see eye-popping returns in long-short funds. In September 2021, notable long-short AIFs were Avendus Absolute Return Fund (up 2.6â„…), Edelweiss Alternative Equity Scheme (up 2.3â„…), TATA Equity Plus Absolute Returns Fund (up 1.8â„…), Avendus Enhanced Return Fund-I and II. Here is a look at long-short AIF performance in a tabulated format.
Housing Development Finance Corporation Limited (HDFC Ltd), India’s premier housing finance company, has launched ‘Green & Sustainable Deposits’. The company says its offering comes with an aim to safeguard the environment from climate change. These fixed deposits will be directed towards financing of Green and sustainable housing credit solutions and services. Find out more. Key features: Eligibility: Individuals (Residents & NRIs) Period of Deposits: 36 – 120 months Interest Rates: Up to 6.55% p.a. Senior Citizens (60 Years+) will be eligible for an additional 0.25% p.a. on deposits up to Rs 2 Crore. Additional ROI of 0.10% p.a. will be applicable on these deposits up to Rs 50 lakh per calendar month per customer if placed/renewed through HDFC online platform. Simply put, the interest rate on these deposits will be up to 6.55 percent, with a tenor ranging from 3 to 5 years. On deposits up to Rs 2 crore, citizens over the age of 60 would be liable for an additional 0.25 percent interest per annum compared to those below regular citizens i.e. below 60. Rating of deposit HDFC’s Deposits are rated AAA from both CRISIL and ICRA for the past 27 consecutive years.  How to invest HDFC deposits can be placed through the HDFC’s online deposit platform. Company speak Renu Sud Karnad, Managing Director – HDFC Ltd said, “Safeguarding the environment from climate change is the need of the hour. We at HDFC have enhanced our environment and social due diligence and are working towards expanding our footprint in financing more green homes. Our Green & Sustainable Deposits are aligned with UN’s Sustainable Development Goals and it will also empower our depositors to direct their investments to financial solutions that have a positive impact on the environment and the society at large.†Comparison with other HDFC deposits HDFC Bank on the other hand offers an interest rate ranging from 2.50% to 5.50% on regular term deposits of tenor ranging from 7 days to 10 years. The private lender offers an interest rate ranging from 3.00% to 6.25% to senior citizens across the same tenure and against deposits of less than Rs 2 crore. HDFC Bank also offers a special fixed deposit scheme to senior citizens for a limited period of time. Why invest HDFC Ltd is a stable business and provides consistent AAA rating offer comfort. Do note that the Union Cabinet has recently cleared an amendment that allows customers of failed or stressed banks which are placed under moratorium to get their deposits (upto Rs 5 lakh) back within 90 days of start of moratorium. They would be able to get the deposits up to Rs 5 lakh back under the deposit insurance scheme of the Deposit Insurance and Credit Guarantee Corporation (DICGC). However, deposits of NBFCs such as HDFC Ltd. are not currently covered under deposit insurance.Â
Want to understand about investing in global stocks and in cutting edge innovations? Here is your chance to learn about diversifying abroad. Wealthzi in association with PhillipCapital is hosting a special webinar on ‘Investing in International Equities and Global Innovation’ on Saturday, July 24, 2021 at 130 PM (IST)/ 12 PM Dubai.
PhillipCapital India’s MD & CEO Vineet Bhatnagar and Mihir Shirgaonkar, AVP, Alternative Investments, are the key speakers who will give you a lowdown on international equity investing and in global businesses that are driving innovations.
PhillipCapital is an integrated financial house Since 1975 with a global presence in 15 countries. Today their assets under management stand around USD 47Bn with 1.3m clients worldwide.
Vineet, an IIM-A alumni, is a renowned market veteran, has more than 25 years of experience with large BFSI companies. Mihir, who holds an MBA-PGPX from IIM Ahmedabad, and also a Chartered Accountant & CFA Charterholder, manages Phillip International Portfolio from Gift City in Ahmedabad.
Investing in the Gift City based financial vehicles also allow you tax advantages if you are an NRI or an overseas citizen, as your tax residency will determine the tax incidence on the gains.
As recent years experience shows, having diversification in one’s portfolio across geographies is a good thing. Overseas equities as a diversifier has worked out effectively to not just stabilise but also bolster investor returns. And thanks to the depreciation of Indian currency versus US dollar, international stock returns have been juiced up. This has made Indian investors consider exposure to international equities for their long-term portfolio.
Retail focused and technology driven housing finance firm IIFL Home Finance Ltd (IIFL HFL) has announced the opening of its public issue of Unsecured Subordinated Redeemable non-convertible debentures (Unsecured NCDs) of the face value of Rs 1,000 each.
NCD issue details
The Tranche I Issue includes a Base Issue Size for an amount of Rs 100 crore (base issue size) with a green shoe of up to Rs 900 crore aggregating up to Rs 1,000 crore (Tranche I Issue).
The NCD issue offers various options for subscription with coupon rates ranging from 9.60% to 10.00% per annum. The Tranche I Issue opens on July 6, 2021 and closes on July 28, 2021, with an option of early closure or extension.
The Unsecured NCDs bear a fixed rate of interest under three different series and have been rated “CRISIL AA/Stable†and “BWR AA+/ Negative (Assigned)†indicates that instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk.
Net proceeds of the issue will be utilized for the purpose of onward lending, financing, and for repayment /prepayment of interest and principal of existing borrowings of our company and balance will be utilised for general corporate purposes.
The terms of each series of Unsecured NCDs, offered under Tranche I Issue are set out below:
About company
Incorporated in 2006 and registered in 2009 with National Housing Bank (NHB), IIFL Home Finance Limited is a wholly-owned subsidiary of IIFL Finance Limited. The Company is one of India’s leading housing finance companies and is a preferred choice for affordable home loan requirements.
Through their affordable home loans, IIFL Home Finance makes people’s aspirations of owning a home a reality. As a technology driven housing finance player, it endeavours to make customer experience as seamless as possible.
It has made the entire life cycle of housing loans i.e., from origination to closure, completely digitised.
As on March 31, 2021 its CRAR – Tier I capital, in accordance with the Reformatted Financial Statements was at 19.61%.
Note: Wealthzi consultants can help you invest in IIFL HFL issue. Visit wealthzi.com and open an account or contact at operations@wealthzi.com.
We are pleased to announce a free webinar on on equity investing in association with Ambit AMC on June 19 at 1.30 PM IST or 12 PM Dubai.
The Webinar topic is: “Sprint, Race, Run – Mother of all bull runs is here.” Date: 19th June, 01:00PM (India), 11:30 AM (Dubai)
The speakers at the webinar include: 1. Siddhartha Rastogi, COO & Head of Sales, AMBIT Asset Management2. Manish Jain, Fund Manager, AMBIT Asset Management
The backdrop of the webinar is Indian markets are at all time high almost kissing the peak of 16,000 on Nifty, and 53,000 on Sensex. Most stocks are trading near their 52-week highs. However, India is just recovering from a devastating second wave of Coronavirus killing tens of thousands of people, and affecting the economy badly. India was just about recovering from a negative 7.2% growth in 2020 with a positive 1.1% growth in Q1 of 2021. This bounce has been stopped in its tracks by the second wave, while there are still uncertainties around a third wave of the epidemic.
Be that as be may, the stock markets have been on a roll with the indices recording new highs almost every day. The market participants believe, India may see a stupendous growth over the next decade, almost trebling from what we are today. There could be multi-year high double digit growth in the economy. Are you ready to ride on this multi-year bull run?
That is our topic – the mother of all bulls runs are here in India, and know how to capitalise on it.
Our speakers are expert fund managers from Ambit Asset Maagement – Siddhartha Rastogi and Maneesh Jain.
Portfolio management services (PMS) is becoming a popular investment route for wealthy Indians. Offering customization, concentration and unique strategies, PMSes have become a big hit with the rich. In this article, we take a look at some of the biggest PMS houses in terms of assets and how their key strategies performed. Thanks to SEBI norms, all PMS houses have to submit strategy return disclosures each month and comparative benchmark returns for 1 month and 1 year time-frames.
Enam
Tracing its legacy to 1984, Enam Holdings is a privately owned and managed firm that makes long-term investments in listed companies, as well as backs entrepreneurs building valuable private companies. While it employs fundamental, bottoms-up research to identify companies with sustainable competitive advantages and execution capabilities, Enam is extremely focussed on the quality of management teams and governance frameworks of the companies it invests in. As an ethical investment firm, it does not invest in businesses that involve intoxication, gambling or anything that harms living creatures. Enam’s management team comprises Vallabh Bhanshali, Nemish Shah, Akash Bhanshali, Manish Chokhani, Gautam Jain, Sridhar Sivaram and Ajay Bhatia.
As on April 30, 2021, Enam managed assets worth Rs 24,782 crore across 701 clients.
For the 1 month ended April 2021, ENAM India Equity strategy, with Rs 16,480 crore assets, clocked 1.2 per cent return compared to 0.41 per cent for Nifty 500. For the one-year ended April 2021, the strategy did 62.24 per cent return versus benchmark’s 54.31 per cent.
Enam India Core Equity, with Rs 4,938 crore assets, in the 1-month period clocked 1.01 per cent versus Nifty 500’s 0.41 per cent and in the 1 year period clocked 74.32 per cent versus the index’s 54.31 per cent.
Enam India Diversified Equity Advantage strategy, with Rs 2,107 crore assets, reported 1-month performance of 1.35 per cent and 1 year gain of 61.57 per cent.
ASK Investment Managers was one of the first companies to obtain a portfolio management services license in India. It is a big player in both discretionary listed equity portfolio management services and discretionary equity overall portfolio management services. It invests only in listed Indian equities for clientele who are India domiciled, as well as offshore, through segregated accounts and commingled funds. Bharat Shah is the ED of ASK Group and Prateek Agrawal is Business Head & CIO.
As on April 30, 2021, ASK managed assets worth Rs 24,425 crore across 19,969 clients.
For the 1-month ended April 2021, ASK Indian Entrepreneur Portfolio, with Rs 13,941 crore assets, clocked 1.29 per cent return compared to 0.45 per cent of BSE 500. For the 1-year ended April 2021, the IEP strategy showed 53.77 per cent return, under-performing the benchmark’s 54.78 per cent.
ASK India Select Portfolio, with Rs 3,562 crore assets, in the 1-month period clocked 1.93 per cent versus BSE 500’s 0.45 per cent and in the 1 year period clocked a rise of 39.58 per cent, lagging the index’s 54.78 per cent gain.
ASK Growth Portfolio strategy, with Rs 1,979 crore assets, reported a gain of 1-month of 2.58 per cent and 1-year gain of 47.84 per cent. Its benchmark NIFTY 50 clocked 1-month loss of 0.41 per cent and 1-year return of 48.39 per cent, which is higher than the ASK Growth Portfolio gain.
Motilal Oswal
Motilal Oswal Financial Services (MOFSL), is a well-diversified financial services company focused on wealth creation through knowledge. The company was founded in 1987 as a small sub-broking unit with two promoters and a peon. It runs one of the biggest PMS set-ups in the country. The management is led by Motilal Oswal, Raamdeo Agrawal, and Navin Agarwal.
As on April 30, 2021, Motilal Oswal AMC’s PMS managed assets worth Rs 14,433 crore across 21,164 clients.
For the 1 month ended April 2021, Next Trillion Dollar Opportunity Strategy, with Rs 7,741 crore assets, clocked -0.88 per cent return compared to 0.45 per cent of Nifty 500 TR. For the 1-year ended April 2021, the NTDOP strategy showed 51 per cent return, under-performing the benchmark’s 55.74 per cent rise.
Value Strategy, with Rs 2,016 crore assets, in the 1-month period clocked 0.5 per cent versus Nifty 50 TRI’s -0.36 per cent return and in the 1 year period clocked a rise of 40.94 per cent, lagging the index’s 49.89 per cent gain.
India Opportunities Portfolio Strategy, with Rs 1,935 crore assets, reported -0.6 per cent return for 1 month period and 1 year gain of 54.61 per cent. This was a sharp under-performance compared to its benchmark NIFTY Smallcap 100 TRI that clocked 5.6 per cent 1 month gain and 1 year gain of a whopping 111.71 per cent.
IIFL Asset Management
IIFL Asset Management is one the biggest portfolio managers and broadly offers Discretionary, Non-Discretionary and Advisory services. Its research & investments employ a top-down approach to identify select sectors with the best prospects while simultaneously picking stocks within these sectors based on a bottom-up, fundamentals-based approach. The portfolios are concentrated, risk-adjusted etc.
As on April 30, 2021, IIFL Asset Management under PMS managed assets worth Rs 11,443 crore across 7,455 clients.
For the 1 month ended April 2021, IIFL Multicap PMS Strategy, with Rs 2,491 crore assets, clocked a 1.86 per cent return compared to 0.17 per cent of BSE 200 TRI. For the 1-year ended April 2021, the Multicap PMS strategy showed 51.91 per cent return, under-performing the benchmark’s 53.92 per cent rise.
Customised Discretionary Portfolio, with Rs 3,909 crore assets, in the 1 month period clocked 1.17 per cent versus Nifty 50’s -0.41 per cent return and in the 1-year period clocked a rise of 23.78 per cent, lagging the index’s 48.39 per cent gain.
IIFL Multicap Advantage Portfolio management services [PMS] Strategy, with Rs 895 crore assets, reported 2.28 per cent return for 1 month period and 1 year gain of 42.02 per cent. The 1 year strategy return was a sharp under-performance compared to its benchmark BSE 200 TR that clocked 1 year gain of 53.92 per cent.
Alchemy
Lashit Sanghvi, Ashwin Kedia, Rakesh Jhunjhunwala and Hiren Ved founded Alchemy Capital Management in 1999. It is currently one of the largest Portfolio Management Services (PMS) providers in the country. Year 2002 was when Alchemy’s portfolio management services begun. In the last 2 decades, Alchemy has come up with just 4 equity strategies compared to many peers who have 10-12 strategies.
As on April 30, 2021, Alchemy under Portfolio management services (PMS) managed assets worth Rs 6,168 crore across 4,150 clients.
For the 1 month ended April 2021, Alchemy High Growth Select Stock Strategy, with Rs 3,020 crore assets, clocked a 4.65 per cent return in April 2021 compared to 0.45 per cent of BSE 500. For the 1 year ended April 2021, this PMS strategy showed 54.81 per cent return, marginally out-performing the benchmark’s 54.78 per cent rise.
Alchemy High Growth, with Rs 1630 crore assets, in the 1 month period clocked 0.32 per cent versus BSE 500’s 0.45 per cent return and in the 1 year period the strategy clocked a rise of 35.29 per cent, lagging the index’s 54.78 per cent gain.
Alchemy Ascent PMS Strategy, with Rs 213 crore assets, reported a whopping 10.47 per cent return for 1 month period and 1 year gain of 88.79 per cent. Both returns are out-performance compared to its benchmark BSE 200 that clocked 1 month gain of 0.14 per cent and 1 year gain of 52.13 per cent.
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Debt Portfolio Management Service (PMS) provides high net worth investors an opportunity to take part in Indian debt markets. This investment approach is tailored to discerning investors, who want a mix of high yield, high income and moderate safety. Given that HNIs prefer to cap equity exposure to 50 per cent of their overall portfolio, debt PMSes are gaining currency as an alternative to generate fixed income type returns. Read on to know more about them.
Liquid strategy
Debt PMSes can be broadly divided into three categories. The first one is liquid strategy.
Liquid debt strategies in the PMS space are suitable for those investors who are seeking capital preservation, and liquidity.
This is apt for investors looking to diversify into debt. Do note that Debt PMS liquid strategies involve low risk and high principal preservation with consistent income.
Liquid strategies are customised, though they retain the flexibility to invest in a wide array of debt papers. The typical investment horizon is about 1 year. Investments are done in cash, money market, and other short maturity fixed income securities. You can compare Debt PMS liquid strategies with overnight, liquid and ultra-short debt mutual fund product baskets.
In the PMS industry, players such as Almondz, Alchemy, Abakkus, Allegro, ASK, Birla Sun Life AMC, Carnelian etc. offer liquid strategies.
Mid-yield strategy
The next broad category in debt PMS world is mid-yield strategy.
A mid-yield debt PMS strategy has the objective of earning higher risk adjusted returns by taking exposure in debt securities in India. It targets the intermediate yield space (ratings between AA and BB) using a buy-to hold approach with a 2 to 3-year horizon. The portfolio focus is to remain diversified across sectors to mitigate credit risk.
Present offerings in the overall mid-yield debt PMS space are Scient Capital Aries, Karvy Excel, AK Capital Credit Ease, Barclays Discretionary Dynamic Fixed Income etc.
Do note that unlike in mutual funds, PMSes do not have fixed categories which means strategy definitions can be loose and vary from one PMS house to another.
Mid-yield debt PMS strategies strive to provide a moderately higher yield than many bank FDs. Some offerings may provide scheduled monthly cash-flows to investor.
High-yield strategy
As the name indicates, high-yield PMS debt strategies is about potential high returns. A high-yield strategy is designed for investors seeking regular income and long term capital appreciation. It will invest across various types of high yield debt including real estate backed debt, structured mezzanine debt and securitized debt. A couple of high-yield debt PMS offerings are Scient Capital Orion and Karvy Demeter.
High-yield PMSes target mid-sized companies across sectors where the entities have limited sources of capital. These high-yield opportunities are generally lower rated. Hence, such debt PMSes do investments in privately originated and actively managed portfolio of diversified debt investments issued by mid-sized businesses. Bear in mind these are much more risker. You can compare them with high-risk credit oriented mutual funds.
Why Debt PMS
Mutual funds also offer debt schemes. Then, why should you invest in debt PMSes? Good question.
Debt PMSes provide high customisation to address clients’s needs and risk appetite, which is not present in mutual funds. MFs are products that are meant for many investors, and lacks individuality.
In debt PMSes, clients directly own securities held in an account in their name. In debt MFs, unitholders own units of the fund, which in turn owns securities in the portfolio.
Also, in debt PMSes there is daily reporting of portfolio status – 100% transparent, enabling constant monitoring. However, in debt MFs, NAV is reported daily but portfolio composition reported periodically (monthly).
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Alongside the traditional asset classes such as equity, debt, and gold, India has over the last few years seen the emergence of a new offering: Real Estate Investment Trusts (REITs). At the moment, there are 3 listed REITs and 1 mutual fund that offers exposure to international REITs. Let us look at them and try to assess their performance.
REITs as a concept
Before we begin, it’s important to brush up on basics. REITs are listed and traded on stock markets just like Exchange-Traded Funds (ETFs). A demat account is mandatory for investing in REITs in India.
At present, you have 3 options – Embassy Office Parks REIT, Mindspace Business Park REIT and Brookfield India Real Estate Trust. Open market purchases of REITs are allowed by broking platforms in 200 units (minimum lot size). This means at present you would require between Rs 50,000 to Rs 65,000 to directly purchase REIT units.
Apart from stock market purchases, you can also invest in REITs through mutual funds. Currently, Kotak International REIT Fund of Fund is the only international mutual fund in India that invests only in international REITs. A few domestic mutual funds have also started investing in REITs in the past few years, however, the actual exposure of these schemes to REITs is quite small.
The primary reason to invest in REITs is to diversify your investment portfolio through exposure to commercial reality. But do note that hybrid work-from-home (WFH), new construction, and interest rate risks have tempered investors’ enthusiasm in India’s office space. The extension of COVID-19 restrictions has resulted in most of the local workforce working in technology, BFSI, and consulting sectors (large occupiers of Grade A office space) to continue to work from home for more than a year.
Due to the rising WFH trend as a result of the pandemic, organisations are increasingly evaluating hybrid work strategies that will involve some time of the week working from home, thus reducing the need for office space. Investors are also concerned that new supply will put pressure on rentals. Also, rising interest rates negatively impact the valuation of yield assets like REITs at least over the immediate term. Don’t rule out further near-term weakness if interest rates rise and office spaces report increased vacancies.
In this backdrop, REITs should form 10 per cent of your overall investment portfolio.
REIT options
Embassy Office Parks REIT – Embassy Office Parks REIT is India’s first listed REIT and the largest in Asia by area. It has a 42.4 million square feet. It has 195 blue-chip tenants. Almost 48 per cent of gross rent is from Fortune 500 occupiers. It has nearly 90 per cent occupancy. It also has 1614 keys (hotel rooms). In the 4th quarter, the REIT reported strong cash collections but Covid impact was visible on softer rental growth. The NAV of the REIT is Rs 296. The REIT market price is Rs 327. The REIT’s IPO price was Rs 300. Q4 distribution is Rs 5.6 per unit. For FY21, the distribution payout ratio was 100 per cent. Do note that Q4FY20 distribution was Rs 21.48 and FY20 full distribution was Rs 24.39. Nirmal Bang Institutional Research has a target price of Rs 332 for Embassy Office Parks REIT
Mindspace Business Park REIT – Mindspace Business Park REIT is India’s second listed REIT. It is a owner and developer of quality Grade A office portfolio located in four key office markets of India. It has 30.2 million square feet. It has over 160 tenants. Committed occupancy is 84.2 per cent. Gross contracted rent from foreign MNCs is 82.9 per cent. Recent Q4 numbers indicate rising vacancy which can be a concern. The NAV of the REIT is Rs 345.2 and the REIT market price is Rs 288. The REIT’s IPO price was Rs 275. Q4 distribution is Rs 4.8 per unit. For FY21, the distribution payout ratio was Rs 9.59 per unit. Nirmal Bang Institutional Research has a target price of Rs 294 for Mindspace Business Park REIT. That’s more upside than Embassy Office Parks REIT.
Brookfield India Real Estate Trust – Brookfield India Real Estate Trust is India’s only institutionally managed public commercial real estate vehicle. It is the 3rd listed REIT and sponsored by an affiliate of Brookfield Asset Management, one of the world’s largest alternative asset managers. Its portfolio consists of four large campus-format office parks with a total 14 million square feet. The Brookfield India Real Estate Trust REIT has a committed occupancy of 87 per cent. Its net asset value is at Rs 317 per unit. In March 2021, the REIT said that it estimated to distribute a total of Rs 12.75 per unit over the next two quarterly distributions. The stock market price of each REIT unit is Rs 249. HSBC has a price target of Rs 285.
Kotak International REIT FoF (Fund of Fund) – This is India’s first global REIT FoF. To be clear, the money you invest in Rs 160-crore Kotak International REIT FoF gets invested in units of SMAM ASIA REIT Sub Trust Fund and/or other similar overseas REIT funds. Kotak International REIT FoF was launched in December 2020. Its money is allocated to varied REITs across Singapore, Australia, Hong Kong, New Zealand and Thailand. The REITs are backed by properties such as data centres, logistics, residential, offices and warehouses. Less than six months of price returns of the fund does not mean much in terms of return potential. International REITs give global exposure.
