Key Takeaways
- • Fund managers Renuka Ramnath (Founder, MD and CEO of Multiples Alternate Asset Management) and Nilesh Shah (MD of Kotak Mahindra Asset Management Company) offered divergent crisis strategies at Kotak Private's third 'Take and Counter Take' event.
- • Ramnath argued private markets offer a safe haven during a downturn because private equity investors retain board-level control, affirmative clauses over cash use, and the ability to accelerate, postpone or drop initiatives.
- • Shah argued the aftermath of an asset bubble is when public markets offer unparalleled wealth creation, since public investors often sell assets below fair value while promoters rarely sell companies cheaply.
- • Both managers agreed investors should diversify across public and private markets rather than treating them as an either-or choice.
- • Ramnath suggested an investor moving from 100% public equity could gradually allocate up to 30% of the equity portfolio to private markets over a five-to-seven-year horizon.
Summary
Fund managers Renuka Ramnath and Nilesh Shah gave differing views on how investors should respond to a market downturn, according to Livemint. Speaking at Kotak Private's third edition of 'Take and Counter Take', Ramnath advocated private markets as a safe haven, while Shah pointed to distressed valuations in public markets as a source of wealth creation. Oisharya Das, CEO of Kotak Private Banking, noted that the growth of private markets is giving India's wealth creators a broader opportunity set while making portfolio-allocation decisions more nuanced.
Ramnath, who stressed the safety of directly managing cash and costs as a board member in a private company, said that in an asset bubble crash investors in private markets are 'in control' and not dependent on what public company management chooses to disclose. She noted that private equity investors can use affirmative clauses to dictate cash usage and steer companies through severe macroeconomic shocks. She also said that outsized private equity returns often depend on crisis management, since almost every investment faces a blow that cannot be fully planned for.
Shah countered that the period immediately after a bubble is when public markets are most attractive. He said private company promoters tend to refrain from selling businesses at a discount during a crisis, whereas public market investors often liquidate portfolios at lower prices. Both managers, however, agreed that investors should stop treating public and private markets as an 'either / or' proposition and should diversify across asset classes.
For investors shifting from a purely public equity portfolio, Ramnath recommended scaling up alternative asset exposure gradually. Over a five-to-seven-year horizon, she said an investor previously at 100% public equity could comfortably allocate up to 30% of the equity portfolio to private markets. Livemint, citing a Linqto report, describes private markets as investments not traded on public exchanges, including private equity, venture capital, private debt and hedge funds, which can be accessed directly or through funds. The article carries a disclaimer that its views are those of the individuals quoted and not of Mint.
Ramnath, who stressed the safety of directly managing cash and costs as a board member in a private company, said that in an asset bubble crash investors in private markets are 'in control' and not dependent on what public company management chooses to disclose. She noted that private equity investors can use affirmative clauses to dictate cash usage and steer companies through severe macroeconomic shocks. She also said that outsized private equity returns often depend on crisis management, since almost every investment faces a blow that cannot be fully planned for.
Shah countered that the period immediately after a bubble is when public markets are most attractive. He said private company promoters tend to refrain from selling businesses at a discount during a crisis, whereas public market investors often liquidate portfolios at lower prices. Both managers, however, agreed that investors should stop treating public and private markets as an 'either / or' proposition and should diversify across asset classes.
For investors shifting from a purely public equity portfolio, Ramnath recommended scaling up alternative asset exposure gradually. Over a five-to-seven-year horizon, she said an investor previously at 100% public equity could comfortably allocate up to 30% of the equity portfolio to private markets. Livemint, citing a Linqto report, describes private markets as investments not traded on public exchanges, including private equity, venture capital, private debt and hedge funds, which can be accessed directly or through funds. The article carries a disclaimer that its views are those of the individuals quoted and not of Mint.
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