Wealth management startup Dezerv wants to cash in on rising ‘alternative investment’ trend

‘Alternative investments’ seems to have caught the fancy of India’s high net worth individuals (HNIs) as they look to go beyond mutual funds and stocks and diversify their portfolio across asset classes. Even high-salaried millennials are shunning traditional investment strategies in favour of digital alternatives.

Alternative investments include asset classes or financial investments not commonly accessible and not in traditional investment categories. These include venture debt, private equity, hedge funds, structured products like Sovereign Gold Bonds/Gold ETFs, Market Linked Debentures (MLDs), Real Estate Investment Trusts (REITs) or real estate linked debentures, Infrastructure Investment Trusts (InvITs), as well as pre-IPO (initial public offering) securities, and offshore investments. More recently, cryptocurrency and NFTs have also come into the fold.

While HNIs have a comfortable access to financial advisors and portfolio managers when it comes to creating sophisticated portfolios, the rest continue to evaluate tools and ways to invest in these new asset classes along with their conventional options. 

Mumbai-based wealth management startup dezerv. wants to tap into this niche section of investors. Founded in 2021 by former IIFL Wealth senior managing partners Sandeep Jethwani, Vaibhav Porwal, and Sahil Contractor, Dezerv provides advisory and investment service, particularly targeting senior working professionals, across multi-assets and instruments, including alternatives and new asset classes that are offered online. 

The idea is to unlock access to new asset classes, currently available only to HNIs individuals, and help investors—with a minimum ticket size of Rs 50,000—create sophisticated portfolios with a balanced mix of both conventional and new-age investments.  

Wealth management for growth 

Dezerv aims to break the restrictive idea of wealth management that remains focussed around retaining the value of money (in line with inflation and taxes) rather than translating it into growing capital. Hence, influx of alternatives into investment portfolios, and the consequent need for a dedicated diligence and review advisory for it, which Dezerv claims to offer. 

“Your money not only needs to give you inflation-linked returns but also grow over and above so that you are actually generating a second income. This calls for creating unique portfolios based around growth assets that do not find a place in the majority of our portfolios. There are ups and downs in such instruments but they help grow capital in the long run,” Sandeep tells YourStory. 

Alternatives come with a set of challenges due to their complex nature, high risk, limited regulations, and relative lack of liquidity. Hence, this particular world of investment would require a high degree of due diligence on each opportunity, meticulous processes, and robust post-investment monitoring. Here lies an opportunity for technology-driven platforms to help deepen these financial instruments into investors’ portfolios through technology and human centric diligence and reviews, as the demand surges. 

“A lazy approach doesn’t work with these growth assets. You cannot just put your money and forget about it. We do a lot of research before making recommendations and create the right mix,” the co-founder adds. 

How it works?

Once a sign up request is accepted on the platform, the client undergoes a quick online survey around their investment needs, preferences, background, history, risk appetite (how much downside they can handle), and so on. 

Based on the inputs, a team of experts undertake the risk assessment and create a multi-asset portfolio using algorithm models. “We use modern science and Black–Litterman Model to create portfolios. The quantitative experts run algorithms models to create these portfolios, which are then vetted by our domain experts before giving it to the users,” Sandeep explains.

The users can evaluate the recommendations and connect with the team for further discussion. They can change the portfolio as per their discretion following the discussion. Once the asset mix is finalised, the investments are made through the Dezerv platform and a member partner is dedicated for execution, reporting, and rebalancing of the recommendations. 

The composition of the assets varies across clients, depending upon their exposure to risk. These include a mix of conventional and non-conventional assets, including equity, government bonds, large cap index funds, fixed return credit funds, global instruments, pre-IPO sales, gold funds, and other alternative investments. The startup is waiting for regulation in the Crypto and NFT space to evolve, before offering the same to its investors.

The minimum investment ticket size has been kept at Rs 50,000 while founders claim that the average amount of money invested through the platform falls within the range of Rs 5-7 lakh and goes up to crores. 

Its target audience typically include working professionals in the age group of 30-45, who have some experience with investments and have dabbled in them on their own. 

“We do not have just the typical HNIs on our platform. We get requests from startup employees who have made money through ESOPs. After working for 7-8 years, they get a lump sum amount of Rs 50-70 lakh and want someone to handle this money for them,” the co-founder says. 

The platform is currently ‘invite-only’ as it wants to provide quality service with a human interface. Besides the personal network of the founders and word-of-mouth, Dezerv also receives sign up requests via social media channels, he adds. 

The requests are evaluated and if an ‘invite’ is sent out to the customer, they can access the services. It has got about 65,000 sign ups to date, and now claims to be adding close to 20,000 signs up every month, starting May.

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Business traction and competition 

Dezerv has a team of 24 of which 12 are investment experts who design the portfolios while the member-partners come in post investment. In terms of volumes, the platform claims to have over Rs 600 crore of transacted assets on its platform and is expected to touch Rs 1,000 crore in the next few months. 

The startup doesn’t charge any fee from the users but makes money from the manufacturers of the financial products they recommend. “We inform our users about how much money we will be making through their portfolio. This is not something which is common in the industry,” says Sandeep. 

Within six months of launch, Dezerv raised a seed round of $7 million. This, the founders claim, has provided it a runaway of 2-3 years. It counts marquee investors like Elevation Capital, Matrix Partners India, Whiteboard Capital, Blume Founders Fund, and several angels, on its board. 

Dezerv’s competition comes from the investment arm of private sector banks besides a host of other independent financial advisories in the country. Tech platforms like Groww, Zerodha, Upstox, Scripbox, and Kuvera are also operating in the space but follow a more Do-It-Yourself (DIY) approach without much human interface. 

The market for alternative investments has been growing at a great pace in recent years, and as per the latest data from the Securities and Exchange Board of India (SEBI), assets of Alternate Investment Funds (AIFs) grew over 32 percent year-on-year to Rs 5.35 lakh crore at the end of September 2021.  While most of these are linked to growth venture capital and private equity funds, it also signifies the rise of interest for such asset classes and the need to make them more accessible.

Future

The startup plans to remove the ‘invite only’ feature as it scales. It has recently bagged its Portfolio Management Service (PMS) licence and would add the offering to its current services. A portfolio manager is required to accept minimum Rs 50 lakh or securities having a minimum worth of Rs 50 lakh from the client. 

On the question of changing the current offering or target audience following the PMS services, the founders clarified that their minimum ticket size would remain Rs 50,000 and portfolio management will be an additional option for the clients. 

“We believe that our current set of users who have an average investment size of Rs 5-6 lakh will gradually accumulate higher amounts of money in the next 4-5 years. They will then be eligible for our PMS service. It will be a natural extension and we are creating a capability,” says Sandeep. 

The offering will also expand the startup’s audience to HNIs, creating a bigger monetisation pool for Dezerv.