Mumbai: Deutsche Bank sees little appetite for riskier assets among India’s rich despite a more than 60% rebound in the domestic stock market this year, a top executive said on Friday.
Ajay Bagga, head of the German bank’s Indian wealth management arm, said its assets under advisement had risen by more than a quarter in 2009 but clients were seeking safe-haven investments.
“Most of the money is still very short-term, very fixed return, very preservation oriented. Very little money is looking at taking risk,” Bagga told Reuters in an interview.
Deutsche has a 55-member wealth management team spread over five large cities in India and services individuals with at least $1 million in bankable wealth.
Bagga said while some clients had started to invest in stocks, demand for real estate and private equity investments remained low.
“Clients have lost that bull market frenzy of chasing returns. It is back to sober asset allocation,” he said.
The world credit crisis has wiped away trillions of dollars of wealth globally, cutting profits of wealth managers who charge higher fees on riskier asset classes such as stocks as compared with short-term investments such as money market funds.
In India, the number of wealthy fell by nearly a third to 84,000 in 2008, the fastest drop in the world after Hong Kong, as a 52% slump in domestic shares hurt the net worth of individuals.
By comparison, the world’s rich lost a fifth of their wealth in 2008 and their number fell 15% as the financial crisis wiped out two years of growth, according to a Merrill Lynch/Capgemini report. Their wealth dropped below 2005 levels to $32.8 trillion.
The steep losses are, however, drawing the rich to large wealth managers who have gained market share in 2009 helped by their stability, brand and diverse product basket, Bagga said.
“There has been a flight to safety -- both in asset classes and service providers and we have benefited,” he said.
India’s nascent wealth management industry is dominated by informal wealth managers such as small brokers and investment advisors. Consultant Celent estimates they control 1.5 times the assets managed by bigger institutions like the private banks.
Larger firms such as Deutsche, which was one of the first foreign banks to start wealth management in India in the 1990s, are gaining share on the back of their wider offerings.
Private banks generally shy away from disclosing their assets but industry players say Deutsche, Merrill Lunch, HSBC, Standard Chartered, BNP Paribas and India’s Kotak Mahindra Bank are among the top wealth managers in the country.