Shyam Maheshwari

Article

is the founder and partner of SSG Capital Management. Maheshwari serves on the Ares SSG investment committee and is a director of Ares SSG Singapore. He focuses primarily on origination and evaluation of investment opportunities in India and other regions throughout Asia. Mr. Maheshwari is also an Associate Member at the institute of Chartered Accountants of India. Shyam Maheshwari evaluates the importance of fixed income deposits becoming part of the core portfolio. He asserts that just like the global market, fixed income should be a dominant part of the investment portfolio.

"Generally, bank deposits, savings accounts, etc formed the base for fixed income. However, over time mutual funds with liquid plans gave better tax-adjusted returns than bank deposits shifting the preference for savers. In contrast, in the global market, fixed income dominates the investment portfolio and the much talked about 60:40 (Stock: Fixed Income) portfolio is a reflection of it. Granted emerging markets are more prone to volatility — hence one would want compensated to take the risk — which is rightly available in the equity world. Nonetheless, equity-heavy, real estate-embedded portfolios have idiosyncratic risks in times of downturn and need for liquidity", explains.

The high-yield market is all but non-existent in India, Shyam Maheshwari highlights. A simpler analogy would be stock markets. Imagine the stock exchange with only blue chip companies being allowed to list. That would make the markets very boring, not giving a choice of the risk-reward spectrum to investors. But in reality, the market has choice of blue chips and retail investors are making those choices every day — in an environment where the regulators are ensuring proper disclosure and regulatory actions. The same should be the case for bonds, so that with appropriate disclosures, the investors would make their decision.

In global markets, this has been the norm. elucidates the situation that the global markets are vibrant with USD dominating currency in which not only the US domestic issuers are issuing bonds, but global companies, as well as sovereigns issue bonds, benchmarked and compared with the universe of bond issuers with ratings, tenor, country of origin, etc. Shyam Maheshwari also points out that, while the mutual fund is a good way to participate in the bond markets, there should also be an opportunity to construct a dynamic portfolio based on personal preference of individual bonds.

Unless there is concentrated effort from multiple angles to develop the markets, it would take much longer for the markets to develop on their own. Therefore, Shyam Maheshwari stresses that as India embarks on high single-digit GDP growth over the next decade or two, it would need a well-functioning bond market alongside its relatively developed equity markets to provide the necessary financing to the industries for their growth needs in the times to come.