Design and implementation of multi-asset funds in India

Abstract

India, over the past decade, has steadily emerged as a center of attractive investment opportunities, owing to high GDP growth rates and rising levels of per capita income. Asset management in India is going through a steady metamorphosis with rapidly growing AUM attributable to an influx of foreign investment and a steadily increasing investable surplus, albeit in the face of changing regulation. Although valuations have increased at a rapid rate, investors have been weary of high volatility and are seeking investment products that focus on risk adjusted returns. Multi-asset investment funds are gaining prominence worldwide as they offer the benefits of diversification, while enabling exposure to an array of asset classes. The market for alternative investment products in India is at a nascent stage, offering tremendous potential for fund managers who can not only cater to the risk and return needs of investors, but also provide innovative and novel solutions that extend beyond the prevalent homogenous product mix to a target market in which investor literacy is progressively increasing. This thesis provides a background of the Indian capital markets, specifically the Asset Management Industry, to determine the key value drivers that are imperative to success and leadership in the future. A segmentation of the market is conducted to offer targeted distribution and marketing in an otherwise diverse and broad market. An analysis of the risk and return metrics of asset classes has been performed to devise model portfolios that illustrate the value added of multi-asset funds. The study also provides competitive strategies for fund managers seeking to establish and grow their business in India.