Family Capital Emerging Markets: India – family offices, venture, and the future

Family Capital has introduced a new section to cover family offices and investment opportunities for them in emerging markets – Family Capital Emerging Markets.

Traditionally, family offices tend to stick to their home markets. They like what they know and believe they can get good returns with low risk by staying local. That mentality isn’t going to change radically, particularly in the US, because in many cases their thinking makes sense.

But it would be foolish to dismiss the rapid economic growth in emerging markets and the investment opportunities this gives rise to. Investment opportunities play themselves out in many levels, from the extraordinary economic success of China and India, and the growth of the so-called Velocity 12 nations*, which are poised to create the next billion middle-class consumers.

As investors who know emerging markers well like Meraj Alam, managing partner of Earlsfield Capital, says: “Given the high underlying economic growth, developing markets such as India, offers long-term investors with the potential for very attractive returns.”

At a micro level, this is giving rise to a huge boom in entrepreneurial efforts in many emerging markets, creating a startup culture, which arguably rivals that what exists in more developed markets. Family Capital Emerging Markets will look at the growing ecosystem of family offices in these markets, the investment culture that has given rise to them, and how family offices in more developed markets might successfully access these markets.

Given India’s pivotal role in the success of emerging markets, it seems appropriate to start our coverage with this Asian economic powerhouse. India is forecast by the IMF to become the fifth biggest economy in the world in 2019, overtaking the UK and France. Its GDP growth rate is predicted to outpace China this year and next. As one prominent economic commentator said recently about the country: “India matters now and will matter still more in future.”

India, along with China, is a pivotal country in the Velocity 12, with a fast-growing middle class driving a consumer culture. The country has one of the world’s fastest-growing e-commerce markets in the world, with sales expected to reach $200 billion by 2026, up from $39 billion in 2017. India’s tech sector is also one of the most dynamic in the world, much of which is centred on the three cities of Bangalore, New Dehli and Mumbai, but increasingly important in other parts of the country as well.

A recent report from Bain & Company and The Indian Venture Capital Association highlights the dynamic venture capital and startup culture in India. According to the study, India has one of the top startup ecosystems in the world, with around 3,500 funded startups, and their numbers growing at around 30% a year. Altogether, the value of venture capital deals grew five times in the ten years up to 2018.

Family offices, local and from abroad, are a big part of the healthy venture/startup culture in India. Two of the country’s most prominent family offices came out of  the country’s tech industry – Catamaran Ventures, the Bangalore-based family office of Narayana Murthy, the co-founder of India’s most successful tech business, Infosys; and Innovations Investment Management India, also based in Bangalore and set up by one of the other co-founders of Infosys, S. D. Shibulal.

Local experts reckon there are at least 120 single-family offices in India. “Within the space of five years, the family office sector has grown from virtually an unheard concept in India to today where the sector is booming,” says Aditya Gadge, CEO of the Association of International Wealth Management of India. A bigger list of family offices in the region is available here (Premium).

There are also signs that family/private investment groups from abroad are investing more in India. Recent Indian deals have involved outside private investment offices Das Capital, Verlinvest, Leo Capital Holdings. See Family Investment Deals of the Week (Premium).

Impact-led investment initiatives in India are also an area attracting global private investment groups, most prominent Omidyar Network and most recently Blue Haven Initiative.

“In recent years, more family offices from western countries include their public and private markets allocation towards emerging markets, with India often at the top of the list,” says Alam.

Over the coming months, Family Capital will be looking at the opportunities emerging markets like India and the other Velocity 12 economies present to global private investment offices and the family office ecosystems emerging in these markets.

If you would like to contribute to this coverage or have any comments, please email Family Capital at contact@famcap.com

* India, China, Pakistan, Myanmar, Vietnam, Nigeria, Brazil, Egypt, Mexico, Philippines, Indonesia, and Bangladesh.