Best Investment Options for HNIs

High Net Worth Individuals (HNIs) have a huge amount of capital and are looking for opportunities that can provide them with substantial returns on their investments.

In general, HNIs are people who have an investible surplus of more than 5 crores. An interesting statistic states that in 2017, India was estimated to have about 270,000 HNIs, and it is further forecasted that by 2027, this figure will grow to 950,000—crazy, right?

Apart from that, these UHNIs hold a wealth of nearly $1.5 trillion, which comes to about 58 percent of India’s GDP. Interestingly, more than 80,000 HNIs are based in cities such as Mumbai and Delhi.

If you are one of these elite individuals and are scouting for parking your wealth, here are five such investment options you may want to explore:

List of Ideal Investment Options for HNIs

1. Real Estate Investments

For a while, real estate was viewed as one of the HNIs’ most appealing investment recommendations since it allowed capital growth and potential in relatively steady sources of income. HNI investors would, however, only invest beyond residential property and invest in the commercial, luxury, and international properties. These would allow for diversification that made high returns possible when debt was properly used.

Commercial properties can be an avenue of tens of thousands of dollars in rental income regularly received, given that buildings are useful for offices, shops, or industrial purposes, which remain unaffected by changes in the market. Also, real estate in high-end residential property/vacation homes can be used both for investment and personal purposes.

2. Private Equity

Putting your money in private equity can be a strategic addition to the investment portfolios of HNIs. In India, HNIs expand their investment beyond stocks, they consider opportunities in private equity and venture capital. In some cases, they may also acquire companies that are struggling and completely restructure them to earn profits.

For HNIs, venturing into private equity provides an option to broaden their investment. This expansion can yield higher returns when compared to the traditional stock market.

Nonetheless, it’s important to note that the returns from private equity can vary based on the performance benchmarks. Additionally, accessing performance data for private equity investments might not be as easy as it is with publicly traded stocks.

3. Bonds and Fixed Income Securities

Equities give super-fast growth, whereas bonds provide stability. Bonds may further compensate you by giving interest monthly. They return the principal amount that is invested when held to maturity. If you are an HNI investor, then a mix of government, corporate, and municipal bonds can provide a balanced risk-reward profile.

Fixed-income securities can be one of the good options for steady income. The corporate bonds and government securities have less risk compared to the equities.

4.  Peer-to-Peer Lending (P2P)

In HNIs, peer-to-peer lending occurs directly from a lending investor to other investors and borrowers. It is now possible to get returns of up to 12 per cent P.A. in a low-interest-rate environment. Plus, it’s free from market volatility.

Diversification into such investment options as Lumpsum, MIP, and Manual Lending through P2P lending platforms like LenDenClub: 

Manual Lending

Manual lending is an excellent way to diversify a portfolio and realize high returns. This is an ideal way of lending money since you are in full control of your lending amount, and you can make informed decisions based on your research and analysis.

It allows lenders to select their borrowers based on multiple parameters. They have the option to lend their money to the borrowers who match their criteria under manual lending. They can choose a tenure for the loan that serves their goals of lending quite well with a minimum tenure of 1 month and going up to 36 months. This allows for the flexibility in how HNIs can adjust lending as per financial plans.

Automated Lending

Moving to the realm of automated lending, the Fractional Matchmaking Peer to Peer Plan (FMPP) offers structured products like Lumpsum and Monthly Income. These schemes are designed to maximize interest through hyper-diversification, where your funds are spread across numerous borrowers, significantly mitigating risk.

In Lumpsum, the amounts range from ₹10k to ₹50L with tenures from one to six years, offering simple interest rates up to 15%, with the payout at the end of the lending period. 

MIP allows for lending from ₹1 Lakh to ₹50 Lakh, with tenures of one to three years and a potential simple interest rate of up to 10%, with monthly payouts.

Deciding between manual and automated lending depends largely on your investment style, risk tolerance, and financial goals.

5. Alternative Investments

Alternative investments, including commodities, hedge funds, and collectibles such as art and antiques, help HNIs diversify their investment portfolios. Such investments exhibit low correlation with traditional asset classes, and hence, they are always ready to hedge market volatility.

Hedge funds are particularly attractive to HHNIs by the application of sophisticated strategies that may include short selling, leverage, and derivatives to increase returns. Particularly, commodities like gold may also help hedge against inflation and currency fluctuations.

Factors to Consider

1. Risk Tolerance

The HNI investor needs to understand the risk tolerance. High returns may be good, but they come with greater risks. An investment strategy should support his ability to fight back against the losses. Doing it across asset classes will definitely help manage risk and will also provide more stable returns.

These may range from what could be considered domestic investments and foreign investments to high-straits high yield, like equities and venture capitals, combined with more stable investment classes like P2P, bonds, and real estate for the Indian HNI Investors.

2. Length of time of the investment

Investment horizon of investment decides the ideal choice of assets. In the case of long-term assets, there can be market volatility in equities and the real estate emerging, whereas short period investment asset choices will be of bonds and P2P. Likewise, HNIs must also consider the call on liquidity that their portfolio needs. Alternative investments, such as private equity, P2P, or real estate, may have a long lock-up period and hence may be illiquid through costs and losses.

Conclusion

For high-net-worth individuals, investing does not merely represent wealth creation; it represents making money work harder. Several channels of investment, such as real estate, equities, alternative investments, and P2P lending, provide the leeway to custom-make portfolios according to the risk level, time horizon, and financial objective of the HNI.

High-net-worth individuals are in a better position to make smart decisions congruent with the improvement of their financial well-being and future security if finance is applied with these considerations.