Alternate Investment Products (PMS and AIF ) and The Next Decade of Wealth Creation in India

Speakers: Aashish Sommaiyaa | CEO, Wite Oak Capital Management; Vikaas M. Sachdeva | CEO, Emkay Investment Managers Ltd.; andBhautik Ambani| MD, Avendus
Nimesh Mehta
Date & Time:
6th Feb 2021; 12:20 PM to 01:00 PM

Session Highlights

The session started with a blunt, basic question—why should an investor invest in PMS or Long only AIFs when he already has investments in Long only Mutual Funds (MFs)?

So many things in a MF are necessary that if you want a “novice investor” to feel comfortable and to achieve the highest rates of return possible, then MFs have to be “straight and jacketed” and the amount of risk that they can take to generate a targeted return has to be mellowed down as opposed to PMSs, for instance. Where an investor has to look at a MFs NAV and gauge his investments, Alternates work differently. In PMS, an investor’s investments reflects in his own demat account and hence there is a greater amount of transparency as well as “emotional engagement.” Also, there’s a lot of flexibility with respect to the fees. AIFs on the other hand combines the best of both worlds— to quote Mr. Sommaiyaa “it has the operational and investment latitude of PMSs and has the cuteness of MFs.”

Apart from this, Alternates are needed to generate Alpha. Since MFs are now being perceived as nothing but FD+ returns, a “savvy investor” who wants to generate alpha over the long term, will switch to alternates.

Just as it’s difficult to diversify between equity and debt—if market crashes and interest rates go up, one loses money from both ends, it is also not rationally possible to diversify between traditional asset classes. The only way one can diversify is by going into Alternates. Bhautik Ambani sites the Multiple examples of PMSs and Long short AIFs are there which outperformed the markets positively in March 2020; not even 5% of MFs were able to do so.

On the growth front, as a prerequisite, taxation parity is very important and all 3 speakers explain in detail why is that required; the sooner this parity is achieved, the sooner growth can be witnessed. As pointed out by Vikaas M Sachdeva The simple fact that “Achi cheez aur sasti cheez mai fark hota hai” quite well summed up their discussion on the fees’ front. For any industry to grow, two factors are key—perception and adaptability. Perception is reality in the absence of communication. As more and more people make money in this sector and understand the value addition, communication will take place, leading to migration of investors and Alternates will become mainstream. As far as adaptability is concerned, it is also happening at a good pace and digitization is helping on that front. Once this comfort is there, growth will happen at a much quicker pace. The fact that the “smart investors,” the HNIs put in more monies here than in any other asset class, itself is a statement of how growth is taking place in this field.

On a concluding note, while SEBI is trying to make this space more transparent, the attempt should not be to Mutual Fund-ise the industry. Hence, a separate regulatory body/association is required.


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