How to unlock alpha: A playbook for high-net-worth individuals

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Subscribe to enjoy similar stories. High net-worth individuals (HNIs), who have historically taken a conservative approach, are increasingly diversifying their portfolios beyond traditional asset classes and fixed-income instruments. Factors such as rising incomes, evolving financial markets, technological advancements and changing market dynamics are driving this trend.

With a growing appetite for risk and a sophisticated understanding of investment opportunities, such investors can seek optimal returns while managing risk. With a multitude of options – from low-cost index funds to high-risk, high-return products such as private credit – it’s more important than ever to construct a dynamic portfolio. Factor-based investing, which looks for specific attributes such as value, growth or momentum, can be used to exploit market inefficiencies.

In addition to traditional market-cap-weighted indices, factor indices, also known as smart beta indices, have emerged as a popular investment option in developed countries. For instance, in the US, smart-beta ETFs or factor-based products account for $2 trillion of the $10 trillion of assets in ETFs. Also read: Building a nest egg from birth: How NPS Vatsalya can secure your child's future The Nifty Low Volatility 50 Index has shown resilience during market downturns, providing a smoother return profile than the broader market.

Similarly, the Nifty Alpha 50 Index, which focuses on stocks with strong potential for alpha, has delivered impressive returns, outperforming traditional benchmarks. Assets such as gold and government bonds offer stability during market storms. Alternative investments such as private equity and real estate can be alluring, but they come with higher risks and