‘Younger investors are driving interest in alternative asset classes’

He said asset allocation preferences are evolving, with equity accounting for up to two-thirds of portfolios and a growing appetite for alternative investment funds (AIFs) and private equity.

Papneja said, “We believe that investments in AIFs and private equity will continue to grow, driven by their potential for diversification and higher returns”.

Here are some edited excerpts from an interview.

What challenges have you faced as CEO and how have you addressed them?

In 2022, we embarked on a transformation strategy for India, focused on strengthening our capabilities in people, product, process, technology, and infrastructure. Now in the home stretch, the plan is taking shape effectively. 

On the people front, we have significantly bolstered management depth with the appointment of a new COO, chief of staff and a new business head for wealth management. We have also expanded our relationship manager teams across regions to improve client servicing, although finding the right talent has not been easy. Currently, we operate in seven physical locations while servicing clients in 13 locations through a hub-and-spoke model. Our ambition is to expand to 10 offices in 20 markets by 2026.

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We have also diversified our business model by incorporating three distinct lines: an advisory business, an investment management business, and a lending business. On the technology front, our focus has been on transforming into a digital-first organisation.

What are the key trends shaping investment preferences among India’s wealthy?

Wealth creation is no longer confined to metro cities, with a growing number of high-networth individuals emerging in smaller cities and towns. This geographical diversification has been accompanied by changes in investment preferences. Asset allocation preferences are evolving, with equity accounting for up to two-thirds of portfolios and a growing appetite for alternatives such as AIFs and private equity. 

We believe investments in AIFs and private equity will continue to grow, driven by their potential for diversification and higher returns. Clients are also increasingly showing interest in ESG (environmental, social, governance) funds as they look to align their portfolios with sustainability goals.

How is the younger generation influencing investment priorities and risk appetites?

The next generation is focused on achieving the best outcomes for people, portfolios and the planet. Sustainability is now a key consideration, with a sizable portion of Julius Baer’s assets under management (AUM) put in responsible and sustainable investments. 

Younger investors are also taking a more active role in establishing family offices to professionalise wealth management. Additionally, there is a growing interest in alternative asset classes, including private equity and private credit, as younger investors prioritise diversification and seek higher returns.

What asset classes do you recommend for superior returns?

Equities remain the best asset class for superior returns. Over the past 30 years, Indian indices have delivered double-digit returns in dollar terms, reflecting the strong growth trajectory of the country’s economy. 

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For clients looking to diversify beyond equities, fixed income provides stability for a well-balanced portfolio, while private equity offers compelling opportunities for growth. Similarly, private credit is becoming an increasingly attractive asset class, offering consistent yields and diversification, especially in a rising interest rate environment.

What advice do you give clients for wealth preservation and growth in unpredictable markets?

We encourage clients to involve the next generation early in decision-making and financial education, ensuring a seamless transfer of knowledge and responsibility. Equally important is maintaining discipline, making rational decisions, and aligning investments with clear financial goals to ensure sustained wealth growth. Additionally, including women in wealth-related decisions brings diverse perspectives and enhances outcomes, making this a critical aspect of effective wealth management.

Are Indian investors showing more interest in alternatives like private equity, real estate, and venture capital?

Yes, there is a growing interest in alternative investments, with REITs (real estate investment trusts) emerging as a robust asset class. REITs offer stable returns and diversification, making them an increasingly popular choice among both individual and institutional investors. The growth in this space reflects evolving investor preferences and a broader acceptance of alternative investment solutions.

Which sectors in the listed and unlisted spaces are most promising for wealth creation?

The financials and financial services sectors continue to present compelling opportunities. Large private banks, for instance, are trading below their three-year average valuations, offering attractive entry points. Beyond banks, the broader financial services sector, including asset managers, NBFCs and capital market companies provide scalability and growth potential.

Strategically, we favour large cap over small cap and mid cap equities in the near term, with a focus on defensive sectors such as staples, healthcare and telecom.

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