The emergence of Indian family offices, driven by the booming local economy, is leading to more formalised structures and teams to manage everything from investments to estate planning and administration, the founder of a family office told India.
“We are seeing a rise in professionalization and institutionalization in Indian family offices,” said Adrija Agarwal, founder of Sattva Ventures Asian investor.
“While these offices were once run by family members or small teams, they now compete fiercely for the expertise of professionals with financial, legal and investment backgrounds to manage asset management businesses.”
Agarwal represents the second generation of the Sattva Group, headquartered in Bangalore, India.
Sattva Group’s main business interests are in real estate, education and e-commerce.
As a result of this development, family offices have expanded their range of services and require them to go beyond traditional asset management. It now also includes estate planning, philanthropic advice, tax optimization and the structuring of company management.
“With the handover of family businesses to the next generation, the focus is now on establishing comprehensive governance mechanisms and succession plans in family offices,” said Agarwal.
She pointed out that the introduction of technology also plays a key role in increasing the efficiency of asset management processes.
“Family offices use customized portfolio management, data analytics for smart investing and state-of-the-art data protection mechanisms to protect valuable financial data,” she said.
The investment strategies of family offices are also evolving.
“Both public and private equity funds, venture capital, real estate and other alternative investments are likely to emerge as sought-after investment opportunities that would offer above-average returns in addition to portfolio diversification,” Agarwal added.
Rapid growth
There are currently over 300 family offices in India, up from 45 in 2018. And that number is expected to grow exponentially as high-net-worth individuals build impressive businesses in tier 2 and 3 cities, according to a PwC India report released in July.
The report also shows that wealthy families today are looking for more sophisticated wealth management solutions and newer investment strategies.
“Diversification and deployment of new capital allocation strategies, assets such as real estate and new ventures related to the current strategic focus are also on their radar,” the report said.
“Family offices are increasingly investing in startups, diversifying their portfolios and seeking higher returns. They are shifting their focus from traditional investments to strategic risk mitigation and exploring opportunities in emerging markets.”
“This dynamic growth is directly attributable to the new trend of investors looking for new opportunities with higher returns but more diversified portfolios,” Agarwal added.
“Our family office, for example, is very interested in alternative investments because we recognize that they have the potential to create significant added value,” she added.
Sattva Ventures is a venture capital fund that combines the patient capital of a family office with the business support of a strategic partner.
Typically, it invests directly in companies and occasionally delegates mandates or separately managed accounts to external fund managers.
Sharrp Ventures, the investment office of the Harsh Mariwala family, the founder of well-known personal care and healthy nutrition brands, recently said: Asian investor Its venture capital investments focus on consumer companies and business models that it understands.
Agarwal also pointed out that as younger generations assume central positions in family businesses, “family offices will be forced to reflect the inclinations of this generation, which could ultimately lead to impact investing, sustainability programs and technology-centric practices becoming their primary motivations.”
Among Indian family offices, the fintech industry is one of the main attractions, having raised a total funding of $853.6 million in 2023, according to the PwC report.
Indian family offices are slowly adopting new technologies such as artificial intelligence, machine learning and data analytics to optimize their investments, driven by the next generation of business leaders, it said.
“The focus is clearly on digitizing operations using more sophisticated software and wealth management tools that reduce dependence on employees and also provide business intelligence (BI) dashboards and real-time data for family members,” the report said.
“While there are some family offices in India that are slow to adopt technology, there are also those that are using advanced algorithms and predictive models to analyze market trends, identify investment opportunities and manage risks effectively.”
ONE SIZE DOES NOT FITS ALL
Industry experts also agree that there is no one-size-fits-all solution for family offices; each family office must be customized to the structure, services, size and team that the family and the companies need at their respective stages of development.
Each of them faces different challenges, depending on their individual level of maturity.
The number of family offices in India is expected to continue to rise as the Indian economy continues to be on a brisk growth trajectory despite short-term setbacks.
Agarwal remains “cautiously optimistic” about the global economic outlook, but acknowledges that financial markets are operating in an environment of complex challenges.
“These include tighter regulatory requirements, rapid technological change and economic constraints due to high interest rates and persistent inflation,” she said.
“In addition, ongoing geopolitical disputes and conflicts contribute to this uncertainty.”
Nevertheless, Agarwal is very optimistic about India’s prospects, citing a combination of favorable demographic developments and political stability that are putting the country firmly on a consumption-led growth path.
She said previously Asian investor The family office is developing its portfolio with a mix of private and public assets.
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