India family offices turn more institutional, eye new asset strategies

The emergence of Indian family offices, propelled by a booming local economy, is leading to more formalised structures and teams to manage everything from investments to estate planning and governance, a family office founder told India.

“We are witnessing the rise of professionalisation and institutionalisation in Indian family offices," Adrija Agarwal, founder of Sattva Ventures, told AsianInvestor.

“Managed historically by family members or small teams, these offices now compete fiercely for the expertise of skilled individuals from finance, law, and investment backgrounds as managers of wealth management operations.”

Agarwal represents the second generation of the Sattva Group, which is headquartered in Bangalore, India.

The Sattva Group’s primary business interests are in real estate, with minor interests in education and e-commerce.

This evolution of family offices has broadened the suite of services they require beyond conventional wealth management, and includes estate planning, philanthropy advisory, tax optimisation, and governance structuring.

“With the transition of family enterprises across generations, the focus is now on establishing comprehensive governance mechanisms and succession plans in family offices,” said Agarwal.

She noted that technology adoption is also taking a central position in the process of making wealth management operations more efficient.

“Family offices are using custom-made portfolio management, data analysis for smart investing and high-end data protection mechanisms to protect valuable financial data,” she said.

Family office investment strategies are also evolving.

“Both public and private equity funds, venture capital, real estate and other alternative investments are likely to become hotcake investment opportunities that would provide above-average returns in addition to portfolio diversification,” Agarwal added.

SOARING GROWTH

There are more than 300 family offices in India, up from 45 in 2018, and that number is set to rise exponentially, as wealth generators build impressive businesses in tier 2 and tier 3 cities, a July report from PwC India noted.

The report also wealthy families are now seeking 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 having adjacencies to the current strategic focus are also on their radar,” the report noted.

“Family offices are increasingly investing in startups, diversifying their portfolios, and seeking higher returns. They are shifting from traditional investments to strategic risk mitigation and exploring opportunities in emerging markets.”

"This dynamic growth can be directly attributed to the new trend in which investors are looking for new opportunities with higher returns but more diversified portfolios,” added Agarwal.

“Our family office, for instance, is strongly passionate about alternative investments, as we recognise their potential to deliver substantial value,” she added.

Sattva Ventures operates as a venture fund combining the patient capital of a family office with the business support of a strategic partner.

It typically invests directly in companies and occasionally hands over 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 health food brands, recently told AsianInvestor its venture investments lean towards consumer businesses and businesss models that it understands.

Agarwal also noted that with younger generations assuming pivotal positions within family businesses, “family offices will be propelled to reflect the leanings of that generation which might eventually cause impact investing, sustainability programs and technology-centric practices to become their prime motivation.”

Among Indian family offices, fintech, is a key attraction that raised a total funding of $853.6 million in 2023, the PwC report noted.

Indian family offices are slowly adopting emerging technologies such as artificial intelligence, machine learning and data analytics to optimise their investments, driven by the next generation of business leaders, it said.

 “There is a laser focus on digitising operations with more sophisticated wealth management software and tools that reduce people dependencies and also offer business intelligence (BI) dashboards and real-time data for family members,” the report said.

“In India, while there are some family offices that have been slow on tech uptake, on the flipside, there are also those that have been using advanced algorithms and predictive models to analyse market trends, identify investment opportunities, and manage risks effectively.”

ONE SIZE DOES NOT FIT ALL

There is also an understanding among industry experts that there is no one-size-fits-all for family offices; each family office needs to be tailored to suit the structure, services, scale and team that the family and businesses require for their specific stage of evolution.

Each one faces a different set of challenges based on individual maturity level.

Family offices in India are expected to continue multiplying as the Indian economy continues on a buoyant growth trajectory, despite near-term hiccups.

Agarwal remains "prudently optimistic" about the global economic outlook although she acknowledges that financial markets are operating in an environment filled with complex challenges.

“These include more stringent regulatory requirements, rapid technological shifts and economic constraints resulting from high interest rate and persistent inflation,” she said.

“Apart from that, continuing geopolitical disputes and conflicts add to this uncertainty.”

Still, Agarwal is highly optimistic about India’s prospects, driven by a combination of favourable demographics and political stability placing the country firmly on a journey of consumption-led growth.

She previously told AsianInvestor the family office continuing to develop its portfolio with a mix of private and public assets.