How India's wealth portfolios are evolving, says Tata AMC's Anand Vardarajan
Tata Asset Management CEO Anand Vardarajan highlights how passive funds, SIFs and GIFT City are reshaping wealth management. He advocates combining active and passive strategies while monitoring global yields, inflation and valuations to build diversified portfolios.
India's wealth management landscape is transforming, with investors increasingly seeking diversified portfolios beyond traditional equity and debt investments. Tata Asset Management MD & CEO, Anand Vardarajan, explained at the ET Alpha Wealth Summit 2.0 how newer investment products are changing the game for India's affluent investors.
The conversation centered around the significance of tracking global bond yields, particularly the US 10-year Treasury yield, as a key indicator for understanding market trends. Vardarajan highlighted how a surge in US Treasury yields, up by approximately 70 basis points within a month, could impact equity valuations due to the upward pressure on borrowing costs.
He also emphasized that investors should not view active and passive investing as mutually exclusive strategies. Instead, they serve complementary roles in portfolio construction. Passive funds provide low-cost exposure to an index and can form the foundation of a portfolio, while active funds add alpha, and multi-asset strategies bring diversification through various assets, including commodities and currencies.
Long-short strategies and the Specialized Investment Funds (SIFs) category provide additional layers for investors seeking differentiated returns, while considering downside risks. Vardarajan stressed that each layer should have a specific purpose, depending on the investor's objectives and risk appetite.
The Magnificent Seven technology stocks in the US market exemplified the concept of market concentration. When a few companies dominate index performance, active managers who don't hold the same stocks may underperform. In contrast, during India's 2017 phase, a few heavyweight companies led index growth. The key takeaway was that investors should consider the role of both active and passive strategies rather than relying solely on one.
India's passive investing market was growing faster than active strategies, with mutual fund industry growth at 19%, active funds at 17%, and passive funds at 27%. While passive funds had a smaller base than active strategies, their rapid growth made them an important segment to monitor as investor preferences shift.
Written by urgent.news from The Economic Times - Top News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
