Playing It Safe

2019 has proved to be a rollercoaster ride and the new year will likely be the same. While sentiment on the Street seems buoyant with the benchmark indices flirting with all-time highs, business sentiment is far from bullish. There is no denying the severe economic slowdown — GDP growth is at a six-year low, and credit crunch is squeezing the life out of businesses across sectors. Even in these terrible times, the wealthy have become wealthier. While all economic forecasts point to a further dip in GDP growth, the stock market seems to be discounting the negatives. For now, the rich are sticking to equities and alternatives, since they suffered a hit from betting on structured debt products. It was not surprising to see the wealth advisors at the 8th Outlook Business private wealth roundtable playing it by the ear. Here’s what they had to say.

Outlook Business (OB): Welcome to the 8th Outlook Business annual private wealth roundtable. Last year when we met, everyone was optimistic about 2019, but the run of it has hardly been comforting. So, where did the script go awry?

Oisharya Das, CEO, Kotak Wealth Management, Kotak Mahindra Bank: Undoubtedly, it has been a challenging period, especially with the credit crisis playing out. Clients are still riskaverse and looking at safer havens. We have been very cautious on the credit space. Today, an investor is looking at high quality conservative debt for preservation and not for returns. After the corporate tax cut, we went overweight, but investors chose to stay neutral.

Atinkumar Saha, head-wealth management, Deutsche Bank: We have stayed conservative with a neutral call for one and a half years. Fortunately, we have always managed house calls through asset allocation. So, if you are a conservative investor, you will have 20% equity, while an aggressive client would have around 60%. Also, we were not big on alternatives such as structure, PE or venture funds. So, that kept us in good stead. Our non-discretionary PMS has done exceptionally well with 18% CAGR, beating both the indices by a good margin of 300 bps last year. Focus on large-cap MFs and the PMS has helped us weather the storm. But, going ahead, the skewed performance of large-caps seems like a worrying trend.