Meet the global banker betting on Indian startups

11,000 crores in customer property. It operates under a PMS license to provide advisory and execution services to its clients, and also has a distribution business. LGT, a large private banking and asset management group owned by the royal family of Liechtenstein, entered the Indian wealth management space in August 2022 by acquiring the business of Validus Wealth, founded by Singh.

Singh shares his portfolio details and investment strategies PeppermintExclusive Guru Portfolio Series of. Edited excerpts from the interview.

How is your portfolio allocated between equity, debt and other assets?

My personal portfolio is structured towards equities. So, I would say around 45% in Indian equity, 30% in listed and 15% in unlisted. Cash and Indian loans are around 20% and gold is 5%. I also have investments in global stocks and bonds (see graphic). I own the place I live in, but nothing more in terms of investing in real estate.

What about international equity?

If I look at my overall financial market portfolio, it is split 50:50 between India and international. One of the main tenets that we have long held at LGT Wealth is that Indian households are not globalized enough. There is a tremendous opportunity to allocate global investment opportunities. The rupee, like any emerging market currency, is a depreciation bias and is prone to risk. It is very difficult to conserve multi-generated wealth in single market, single currency position.

As an NRI who is back in the country, I had the advantage of having a major portion of my portfolio in global equities. But I tell customers to keep their money in at least 20% of global products and services, and align with the dollar, and allocate the rest of India.

As a firm, we look to a wide range of businesses and entrepreneurs for our clients. We work with private equity funds and rely on their due diligence. So, when large institutional investors invest in some of these companies and they negotiate the terms of the deal, valuation etc., we bring in our private clients to invest in the company. So, as we evaluate these companies, I also personally invest in them. So, our clients invested in Dunzo and I invested there in my personal capacity. Miko, a companion robot company for kids ages 6-10, is one of the ideas we really strongly believe in. And, the third is NRT (NewSpace Research and Technologies), which is one of the leading drone companies in the country working with the Indian Air Force and the Indian Army.

Is all your equity exposure through direct stocks only?

No. I have a mix of three-direct stocks, mutual funds and PMS (portfolio management service). The division is probably equal, one third each. There are parts of the market where there is no way to create alpha.

Here, mutual funds or ETFs that are low cost and tax efficient do very good work. But then, there are some very good PMS managers who I trust, especially when you go to the mid -cap and small cap. You want these managers to use your intelligence and outline to choose the right winners. So you also have a place for it.

And then, there are some stocks in India (like HDFC Bank) that you always want to hold for the very long term. So, the ones I hold straight.

Which was your first stock? Are there any stocks that have done well and others have not?

Another thing that has worked for me is banking stock, especially SBI. Given the size of the banking industry in India and then it is completely associated with the Indian Economic Chakra, they are the best representatives for it. Some banks may be mismanaged but as an area it is very well aligned.

What have been your portfolio returns since inception?

Equity will be 12-13% and debt 8-9% (CAGR, 2010 onwards). Private market investments have fared better, but many of them are yet to be reaped and have paper returns.

What have been the key drivers of your equity and debt returns?

For Indian equities, I would say that: don’t make any mistakes, be clear about your strategy, don’t go for multi baggers and hence don’t squander your capital, and be long term oriented. And with debt, be a little mindful of where you’re investing. Do not take any risk while investing in debt as you are investing in it for a specific purpose.

I tell investors that Indian equity is 14-15% compounding asset without doing anything spectacular. With the Indian interest rate structures, as they are, if you actually have made it wisely, then the 8–9% loan is the required return in the loan.

There is about making a portfolio of lending means that are unrelated, because when you do this, you reduce the variability of the overall portfolio. Therefore, in debt, I have high quality bonds and MLDs (market debentures). With MLD, you can invest in A-Retted high quality NBFCs and they are also efficient. You are taking some credit risk, but you are getting the reward. (MLD is a hybrid product where the return is associated with the performance of the underlying index. Treatment by adapting them when sold before maturity makes them popular.)

My portfolio has a component of venture debt, and InvITs and REITs and then some of the money is kept liquid. I love long term insurance (non-participating plan) in my debt portfolio.

Do you have health and life insurance?

There are two types of life insurance that every family should consider with two specific needs.

One is term insurance to take care of your family after your death. I have a life cover (including my company’s cover) which provides income replacement for my family for six years. The second need, which is more likely for most people, is that you really need a steady income once you stop working. A non-participating plan is very effective in converting your investment today into an annuity that provides you unconditional, guaranteed and tax-free income for the next 25 years.

Must have health insurance. I feel a little guilty for not having one because my firm takes care of it.

What does wealth mean to you?

Money is something that gives you the freedom to do what you want to do, professionally. Whoever has money, he gets the privilege of investing his time in those things that they like and thus they should see it, and nothing beyond it.

(Note to readers: Although Singh uses insurance as an investment in his debt portfolio, it is See How Insurance and Investments Should Not Be Mixed.)