India made headlines in the family office world earlier this month when its markets regulator was forced to deny they were considering new regulatory oversight for family offices.

But this did highlight how family offices are increasingly relevant within the country’s financial industry.

A report earlier this year from EY & Julius Baer stated family offices there grew from just 45 in 2018 to nearly 300 last year.

Indian families dominate Asian rich lists (the Ambani family firmly in top place), and the world’s fourth largest economy is already home to over 200 billionaires, behind only the US and China.

That family offices play an increasing role makes sense.

On a recent trip to Mumbai we met up with a next-gen principal at a Mumbai family office who openly shared insights on the local ecosystem.

Like so many in the global industry, he preferred to stay anonymous.

We met at a towering residential complex in the heart of the city, home to a wealthy community where he and most of his extended family reside. It was another stark reminder of the wealth disparity in the world’s most populous country.

Over coffee he shared context on what’s happening in the Indian family office world, highlighting the next-gen effect, and why investments might be diversifying in asset classes, but staying concentrated on India.

The Structure

Source of wealth

“Our family has been in the textile business for 50 years. My grandfather founded a vertically integrated textile manufacturing company that makes yarn, fabric and garments for large global and Indian brands. It is a publicly traded company with $150-$200M in annual revenues.“

The next-gen effect

“I studied finance at Wharton and worked in management consulting in New York, before coming back to India to join the family business.”

Stats don’t tell the full story

India lost over 3,500 millionaires last year, ranking third highest in outward wealth migration (many went to Dubai, just a 3-hour flight from Mumbai). But the country also minted over 35,000 new millionaires in this same period.

“My global experience has had us make some investments in Singapore and the US. Even after that, in reality, we do see India as the larger opportunity, and view global investments as a hedge on country risk and concentration risk.“

Riding India’s growth curve

“Our investments are heavily focused in India as that is a market we understand, and also a market that has all the tailwinds for growth in the coming decades.”

“More importantly, India is such a large and fast growing market, that there are opportunities in so many sectors. The macro tailwinds in public and private markets are massive, and likely to continue for decades.”

Professionalization in progress

“We also see a change in the way family offices are managing their capital, as second and third generation members come back into the businesses, and try to professionalize the way things are run.”

“As the family office ecosystem matures in India, we will continue to see a shift of some meaningful percentage of allocation away from traditional investments like fixed income, real estate and public equities, towards alternatives.”

India’s perception within the family office world

“I get the impression that global family offices are still wary of India as it's considered a low-trust economy, and they don’t quite know how to navigate the landscape here. So there is scope for innovation in vehicles and institutions that focus on building cross-border trust.”

While GIFT City (Gujarat International Finance Tec-City) was established as the country’s dedicated international financial services center to offer tax and other benefits, it apparently hasn’t built momentum yet.

Managing a family office team in Mumbai

“The biggest challenge is attracting the best quality talent to work at a single family office.”

A tight ecosystem has advantages

“Family offices in India tend to know each other very well, it’s a very small world with high trust amongst a certain set of families that come from legacy businesses. The deal flow sharing and insight sharing is very open.”

Active family office networking

“We are a part of several formal and informal family office networks that organize events on a monthly basis and share deal flow. Further, there are several private WhatsApp groups where family offices share insights and learnings with each other. There are also formal networks like Venture Catalysts who have had success in scaling access to early stage startup angel investing across the country.”

Over 13,000 families in India with +$30M, yet a notable absence of MFOs

“While there are several established wealth advisory firms, and single family offices, the concept of multi-family offices has not yet scaled in India.”

“This might be because there is not yet a high enough density of HNIs who are in the threshold to be served by MFOs. It might also be because the costs of running and setting up a single family office in India are lower, and because families here prefer to be in control of managing their own capital.”

India has the third largest startup ecosystem in the world, with over 100 unicorns

“More and more family offices are getting into private and early-stage investing. We see family offices starting to lead rounds in seed to series C companies that would typically have been led by venture capital firms. We see more and more aggression and openness of family offices to explore alternative asset classes, and we see folks who have traditionally been in public markets moving more towards private markets to unlock value.”

“We think this trend is likely to continue, and feel family offices will be an anchor to driving private investment across the country. We also see more and more family offices who have never had non traditional allocations becoming LPs in private equity and venture capital funds.”

India’s family office landscape is still young, but it’s maturing fast. Shaped by legacy wealth, global perspective, and a new generation that sees opportunity at home, the next decade will be defined by the opportunities in this fascinating market.

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