HNIs see future(s) in exotic oil products

TAKING STOCK

HNIs see future(s) in exotic oil products

Aman Dhall & Dheeraj Tiwari NEW DELHI

INDIAN ultra high net worth individuals (HNIs) have discovered a new instrument to grow their wealth. Exotic oil products overseas such as crude-oil futures and oil exchange traded funds (ETFs) are their theme for the season. In fact, the investments by the ultra HNIs in the oil products space overseas has seen a 10-fold jump during the last three months.
The reasons are not hard to see. India's benchmark index, Sensex, has seen a dip of over 60% in the first half of 2008. Some would even say that it's the eagerness of the HNIs to invest in such products, which is driving up oil prices globally. "Though it's a very small niche who are investing in oil related products, the volumes are rising. Many of these HNIs actually lost considerable amount of money in the January crash of Dalal Street this year. They are now trying to make up for the losses by investing in crude oil futures and oil ETFs as a short-term ploy to book quick profits," a wealth manager told SundayET. While crude-oil futures soared to a new record of above $147 a barrel this week on the New York Mercantile Exchange, the energy-tracking ETFs were sitting atop in the first-quarter performance posting more than 40% returns. US 12-Month Oil Fund (43.4%), PowerShares DB Oil (41.3%) and Power-Shares DB Energy (40.1%) were the top performing ETFs on the New York Mercantile Exchange during April-June 2008. , - - dent (retail banking) and head of wealth management group at Axis Bank, with the markets continuing to remain volatile, HNIs are reluctant to take more exposure in Indian equities. "They're actively looking for new opportunities and now that they can legally invest a substantial amount in foreign ventures, they're more open towards taking exposure in exotic products such as oil ETFs," said Ms Bhasin. She said they've received a number of requests from their clients. However, RBI doesn't allow banks to offer any products which are non-rupee denominated. "But we've heard that some other companies in the wealth management space are offering such products," she said.
    Sudip Bandyopadhyay, CEO of Reliance Money, feels that it's not surprising that Indian HNIs are also now actively speculating in oil futures and oil ETFs. "These are savvy investors who are looking to sense every opportunity they can seize from the markets. Today they are investing in oil products, tomorrow you will find them investing in gold ETFs and probably the day after that they might be buying copper. They are a handful of people who are investing in these leveraged ETFs and short funds that allow them to profit from market pullbacks," he said. A CEO of a wealth management company, in fact, blamed this shortsightedness of HNIs worldwide for the rising crude oil prices in the world markets. "It's short-term money and they should understand they cannot live a life with it. Middle-East oil politics apart, the HNIs globally are to a great extent responsible for building speculative short positions in the crude oil futures, which is driving the prices up. With Indian HNIs also jumping into the bandwagon, it's only adding fuel to the fire already raging on," the CEO said.
    aman.dhall@timesgroup.com