Key Takeaways
- • Alternative assets marketed to high-net-worth individuals often conflate investment structures (PMS, AIF, Gift City schemes) with actual asset classes, obscuring meaningful comparisons and risk assessment.
- • Illiquidity represents the primary differentiator and material risk when investing in unlisted securities through venture capital, private equity, or grey market channels—a risk often underemphasized in sales pitches.
- • Mid-cap portfolio management services (PMS) function as direct substitutes for mid-cap mutual funds and should be evaluated on equivalent terms, not positioned as exclusive alternative investments.
- • The perception of "privilege" in accessing alternative assets is largely mythical; these vehicles expose investors to standard equity risks amplified by structural constraints, yet are frequently presented as sophisticated wealth management tools.
- • Proper investment decision-making requires separating asset allocation strategy from vehicle selection—determining desired exposure to each asset class first, then selecting appropriate structures, rather than allowing sales narratives to drive allocation choices.
Summary
Devina Mehra, founder of First Global, argues that alternative assets marketed as exclusive offerings to affluent investors represent a fundamental misrepresentation of both investment structure and risk profile. The critical issue stems from conflating investment vehicles with asset classes themselves. Financial advisors and relationship managers position products such as portfolio management services (PMS), alternative investment funds (AIF), Gift City schemes, private credit, venture capital funds, and unlisted shares as markers of elevated investor sophistication and wealth status. This positioning creates psychological appeal—clients feel privileged accessing products marketed for ultra-high-net-worth individuals and family offices—but this framing obscures substantive analysis.
Mehra identifies a structural problem in how these products are presented. A mid-cap PMS, for example, operates as a direct functional substitute for a mid-cap mutual fund scheme yet is marketed with different positioning and pricing. Similarly, an AIF or Gift City scheme represents a regulatory or geographic structure, not an asset category. The conflation of structure with asset class prevents investors from making apple-to-apple comparisons essential for rational portfolio construction. Additionally, much of what is marketed as "alternative assets" is not truly alternative at all. Private equity and venture capital funds, despite their exclusive positioning, simply represent equity investments in unlisted companies—fundamentally identical to public market equities in their underlying nature, subject to the same business cycle risks and market dynamics.
The material distinction lies in liquidity constraints. Unlisted securities—whether acquired through grey market channels, venture capital funds, or private equity vehicles—carry dramatically elevated illiquidity risk compared to their publicly traded counterparts. This illiquidity represents a serious, often understated additional risk layer that should substantially factor into valuation and return expectations. Yet sales narratives frequently de-emphasize or obscure this constraint, instead emphasizing exclusivity and sophisticated positioning.
Mehra's core recommendation reframes the investment decision process: investors must first establish appropriate asset allocation across categories based on financial objectives and risk tolerance—a deliberately unglamorous but essential analytical step. Only after determining desired exposure to equities, fixed income, alternatives, commodities, and other asset classes should investors select specific vehicles to execute that allocation. This sequence directly contradicts how these products are typically sold, where vehicle availability and marketing positioning drive allocation decisions rather than disciplined strategy.
Mehra identifies a structural problem in how these products are presented. A mid-cap PMS, for example, operates as a direct functional substitute for a mid-cap mutual fund scheme yet is marketed with different positioning and pricing. Similarly, an AIF or Gift City scheme represents a regulatory or geographic structure, not an asset category. The conflation of structure with asset class prevents investors from making apple-to-apple comparisons essential for rational portfolio construction. Additionally, much of what is marketed as "alternative assets" is not truly alternative at all. Private equity and venture capital funds, despite their exclusive positioning, simply represent equity investments in unlisted companies—fundamentally identical to public market equities in their underlying nature, subject to the same business cycle risks and market dynamics.
The material distinction lies in liquidity constraints. Unlisted securities—whether acquired through grey market channels, venture capital funds, or private equity vehicles—carry dramatically elevated illiquidity risk compared to their publicly traded counterparts. This illiquidity represents a serious, often understated additional risk layer that should substantially factor into valuation and return expectations. Yet sales narratives frequently de-emphasize or obscure this constraint, instead emphasizing exclusivity and sophisticated positioning.
Mehra's core recommendation reframes the investment decision process: investors must first establish appropriate asset allocation across categories based on financial objectives and risk tolerance—a deliberately unglamorous but essential analytical step. Only after determining desired exposure to equities, fixed income, alternatives, commodities, and other asset classes should investors select specific vehicles to execute that allocation. This sequence directly contradicts how these products are typically sold, where vehicle availability and marketing positioning drive allocation decisions rather than disciplined strategy.
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