A guest blog by Agreus Co-Founder and President of Agreus USA, Tayyab Mohamed.
India’s Family Office marketplace is growing at an incredible rate.
Reports suggest that more than 100 Family Offices have been established in the last decade with the Billionaires’ Club in India also expected to grow by 43% to 162 in 2025, up from the 113 recorded in 2020 and much faster than the global average growth of 24%. The number of UHNWI’s is growing too with 10,000 expected by 2024 with a cumulative wealth of $700BN according to EY’s The Private Market Monitor report.
India’s phenomenal growth is not exclusive to Family Offices either. According to the same report, over 50% of all unicorns created in 2021 were born in India bringing its total number of unicorns to 78 which sit alongside more than 55,000 start-ups. The number of unicorns is set to grow to 150 by 2025 and it is reflective in Family Offices portfolios in the region with 40% doubling their allocation to private markets in the past five years and start-up investing making up 47% of the average private market portfolio.
The top reasons Family Offices gave for investing in start-ups included the returns (82%), innovation (53%), diversification (39%), strategic interest (39%) and ability to add value (also 39%). This was followed by networking, involving the next-generation and making an impact.
So why is the India Family Office marketplace thriving?
In first place is the drive to Initial Public Offerings (IPOs). India ranks third in the world of listed countries for having the highest number of family owned businesses. As IPOs drive family businesses to go public and create liquidity, Family Offices offer a way to structure this wealth professionally and strategically invest in new asset classes. IPOs are the number one factor in India’s family office growth but it is not alone.
Another reason for creating Family Offices is regulation. This was sparked in 2016 by the Insolvency and Bankruptcy Code and cemented by the 2020 regulations brought in by the Securities and Exchange Board of India (SEBI) which saw investment advisors barred from offering advice and distribution services to the same clients. This saw many families opting for the single Family Office model which naturally allows for more control, discretion and ultimately, higher returns.
We spoke to Amit Anand, the co-founder of INDF, Nifty India Financials ETF who speaks frequently about how India is on-track to becoming the 2nd largest addressable economy for investors.
He said: “India is the world’s 5th largest economy today and is predicted to be the 3rd largest by 2030. This means India is going to be the fastest-growing major economy in the world over the next decade and it has been quite fast-growing at about 7% a year in terms of GDP growth. What is really exciting about India is that its growth is very sustainable, and it is primarily demographics driven.
“A lot of people might not know this but over 50% of India’s population is under 29 years old and about 75% is under 40 so as opposed to a lot of developed economies where policy makers look forward to the next 20 years and worry about how they are going to pay their retirement bills of the majority of their populations, India is going to witness a huge increases in labour force. In fact, I think India is the only major economy that will have an increase in its labour force which causes a huge increase in India’s productive capacity. It means that regardless of external factors or regardless of having to borrow money to grow, there is a natural source of growth and it is sustainable: demographics.”
With more wealth, more ultra-wealthy individuals and more Family Offices, India is certainly a marketplace to watch and one we’ll be watching closely over the next 12 months, especially as it is where I call home.