Industry leader interview: Nitin Shakdher Founder & CEO Green Capital
Momenta sat down with Nitin Shakdher, a professional institutional investor as the Founder & CEO at the Green Capital Single Family Office about his thoughts on how family offices have been impacted by the pandemic.
Green Captial’s core focus on is on PIPE (private investment public equity), debt, private equity, venture capital, real estate, asset management, value investing & investment research. The Green Capital network deal flow extends across London, New York, Dubai, Singapore, Hong Kong, Tokyo & India. His investing relationships are across multi-asset classes: private equity, venture capital, primary & secondary placements, real estate, wealth management, hedge funds, private debt, pension funds, family offices, insurance companies & sovereign wealth funds. Nitin Shakdher is a thought leader, panelist, moderator, speaker on numerous investing forums, events, industry meets, and is a contributor to editorial syndicates for his views on multi asset class investments, asset allocations, trends, capital markets, and early-stage growth businesses in emerging markets. In his diverse experience of 22 years, he has worked across various industries. His experience has encompassed business p&l, consumer marketing & sales, corporate marketing & branding, brand management & strategy, entrepreneurship and growth
Could you tell us a bit more about your experience and background in the sector as well as a bit more on Green Capital?
Firstly thank you for inviting me. It’s a pleasure to speak to the Momenta audience. So here’s a bit of background about Green Capital. We are essentially a single-family office. We are based in Delhi, India. I am the third generation, Chief Principal and Chief Investment Officer of our single-family office. Today, our family office assets under management are approximately £300
million. This is structured across different asset classes: private equity, venture capital, public equity, private debt, bonds, real estate, and alternative investments. We started investing as a family office in 1985. And our core area of operation is in investing as a business and cash flows derived from investing as a business. So essentially we look at ourselves as a hedge fund with proprietary capital.
How are single-family offices looking at global investing post-COVID 19?
I think family offices have this enviable position to have a lot of liquidity with our discussions with numerous family offices around the globe. A lot of the family offices were, a lot more skewed on to cash in terms of asset allocations before the situation arrived. Not because they could anticipate it, but I think they felt that valuations over a seven eight-year period were on the higher side of the scale. Valuations as we went along, were increasing. It didn’t feel that there were any value-based investing deals, which were there. So most of them across private equity or public equity investing, but it’s better to hold on to a lot more cash portfolios. I think family offices typically don’t have a lot of leverage. So I think they’ll be able to manage the crisis as of now. And of course, we enjoy the situation to the point that we get an opportunity to invest, and of course, we see a bounce back. Certain valuations have bounced back quickly as that, so it seems to be a situation where it could be a trading opportunity or could be a long drawn-out recovery, up and down economy.
Valuations as we went along, were increasing. It didn’t feel that there were any value-based investing deals, which were there. So most of them across private equity or public equity investing, but it’s better to hold on to a lot more cash portfolios. I think family offices typically don’t have a lot of leverage. So I think they’ll be able to manage the crisis as of now. And of course, we enjoy the situation to the point that we get an opportunity to invest, and of course, we see a bounce back. Certain valuations have bounced back quickly as that, so it seems to be a situation where it could be a trading opportunity or could be a long drawn-out recovery, up and down economy.
Could you touch more on the travel and regulation ban on the movement of effective kind of cross border deal flow?
I think it has. Because if you look at the investing industry, we are a relationship people-based industry. Most of our processes are online. Most of the work is done online. But a lot of the decision making is done offline. And by that, I mean that in the crisis, we’ve been investing in liquid assets which are online, while we haven’t been able to invest in assets which are namely maybe hard assets like real estate, or even private equity, or even something that requires further due diligence or requires a meeting. There’s only that much you can do at an online meeting. You have to physically meet, you have to go through the documentation. Well, you can do deals online, but I still prefer to do deals traditionally through meetings. I tend to get a lot more on the ground by meeting the person or understanding the investment opportunity. I just feel more comfortable. Having said that, we don’t anticipate at the moment things will return to normalcy maybe until August or September. At least in relation to business travel, not consumer sentiment, I believe business travel will pick up by September. I think we will see a lot more deals being executed by that point.
Which asset classes are being preferred by institutional investors in the current situation?
So, I think, by and large from our discussions and obviously, we can speak only about ourselves in this context. We prefer doing more liquid investments at this point. In particular public equities, within certain sectors; consumer, consumer durables, consumer services, FMCG, pharma, and healthcare. We don’t typically prefer the distress sectors like airlines, hospitality F&B, because we think that the business models in those sectors will take time to redevelop and generate far more efficient revenue. Those sectors will be in for a sort of painful period of around one and a half years to allow revenue to bounce back and it will take time. I mean, of course, you can have a quick bounce back, but a lot of damage has been done in the sector and has changed these businesses understanding of what the underlying business is, what business was in airlines, what business was in entertainment, what business was running in casinos, things like that. There’s a lot of businesses that will need to change due to the impact of the events we see today. Things such as hygiene and social distancing. So if you take the example of what security protocols around the world, were after 2001, the 9/11 incident, I think we can anticipate similar protocols around health, hygiene, and social distancing post COVID. This will become real life and you have to accept it and adapt, which will create work required, from the ground up.
What sectors are looking attractive on valuations and which sectors are an avoid?
I think that the US tech sectors are looking very overvalued. We’re fairly surprised as to the bounce back but we don’t think valuations in that sector are attractive. . We think there is value in emerging markets such as consumer goods in terms of economies and when full lockdowns are eased. We see that the consumption sectors tend to move better. And specifically with a large
In the Eurozone some of the high street retail is struggling. So, there are some issues there in terms of how to rescale and change business models. I think sectors like consumption in emerging markets should do well. In terms of the UK & Europe, if I were to look at stores that had essential products they continue to do well and are getting ready to launch new technologies. Technology products, that are enabling services to be carried out at home and are good for home consumption. We’ve seen that tech businesses that are catering for home consumption seem to be doing fairly better. I do continue to feel that the retail business and real estate will continue to struggle over the next year or two.
What is the strategic asset allocation for single-family offices for 2020-21?
So I think typically, we will allocate 20% to 25% cash throughout and we would like to be fully invested for the rest 70/ 75%. But within that 70 -75% allocation, I would say about 10% will be for emerging market equities and we will potentially allocate about 10% for real estate opportunities in London, New York or Hong Kong.
We will allocate about 15% to opportunities in private debt and credit, in terms of certain funds that we will look at from the Eurozone. Then allocate 10% to direct fund opportunities in London or Singapore, especially VC funds and for the balance 15-20% a mix of gold, alternatives, a bit of exposure in terms of private equity for mid-market growth. Specifically, we’re looking at opportunities in the Middle East, as well as Germany & France for market growth opportunities. That is our projected asset allocation strategy at this point.