“Smart money isn’t always smart”: Anand Rathi’s Feroz Azeez calls out HNI investing bias

Anand Rathi’s Feroz Azeez

The stereotype that rich investors are smarter about markets may need revisiting. Wealth managers say that India’s high-net-worth investors (HNIs) often behave just like retail investors — sometimes worse — selling in panic, chasing fads, and mistaking complexity for sophistication.

In conversation with N Mahalakshmi for the The Wealth Formula's Private Welath roundtable, Feroz Azeez, Deputy CEO, Anand Rathi Wealth, laid bare a data point presenting the hypothesis: Is smart money really smart?

“Is HNI money really smart money?” he asked. “In FY21, when the Nifty averaged 10,732, HNIs sold Rs 1.25 lakh crore of equity mutual funds and Rs 2 lakh crore of PMS. Retail investors, on the other hand, bought Rs 94,000 crore. When markets were low, HNIs sold. When they were high, they bought.”

Azeez said the evidence suggests that many wealthy investors confuse access with acumen.

“I’ve seen retail portfolios with better risk-adjusted returns than Rs 100-crore portfolios,” he said. “There’s so much indulgent investing by HNIs — unlisted equity, global exposure, private credit — when simple asset allocation could have delivered far better internal rates of return.”

‘Indulgence over discipline’

Azeez said HNIs often invest to signal sophistication rather than to build portfolios that actually work.

“They want the product that did 18 percent last year, or the manager who runs a complex strategy,” he said. “But investing is about simplicity, not indulgence. The obsession with ‘smart-sounding’ products hurts long-term returns.”

That critique resonated across the panel. Even Ashish Gumasta, Founder & CEO, Gumasta Partners, said wealthy investors are as vulnerable to fear and greed as anyone else.“Over the years, I’ve seen promoters and ultra-HNIs move in herds,” he said.

He further added, “When markets run up, there’s FOMO. When they fall, liquidity vanishes. The discipline is missing.”

‘Over-diversification dilutes alpha’

Rajesh Saluja, CEO & MD, ASK Private Wealth, said HNI portfolios tend to be bloated with too many overlapping products.

“We often see 25 mutual funds, 40 stocks, and 10 AIFs in one portfolio,” he continues to add, “that dilutes alpha and creates unnecessary complexity. Real wealth creation happens through concentration in quality ideas held with conviction.”

For Saluja, professionalising family offices has helped, but the mindset shift is still incomplete.

“There’s an obsession with collecting products, not building strategy,” he said. “The real differentiator is curation — knowing what to leave out.”

Yatin Shah, Co-founder and CEO, 360 ONE Wealth, said the easy access to alternatives is part of the problem. “Today, HNIs can access everything — private credit, pre-IPO funds, venture capital, structured notes,” he said. “But not all of these are appropriate for every investor. We keep reminding clients that liquidity, tenure, and governance matter as much as returns," he added.

‘The real test is in downturns’

Gumasta agreed that every bull market breeds overconfidence. “Every upcycle creates the illusion of intelligence,” he said. “It’s only when the cycle turns that real discipline shows.”

Azeez argued that true investing intelligence is rule-based, not fashion-driven.

“In wealth management, there’s an obsession with being different rather than being right,” he said. “The real intelligence lies in following a rules-based allocation. If your asset mix changes every year based on last year’s winner, you’re not managing wealth — you’re speculating.”

He also pointed out that many HNIs overestimate the edge they get from private-market exposure. “Anything that can’t be valued transparently every quarter needs extra caution,” he said. “If you can’t explain how it’s priced or why it’s illiquid, you probably shouldn’t own it in large size.”

Retail catching up

Interestingly, several wealth managers agreed that retail investors — long considered unsophisticated — have shown greater consistency.

“Systematic investment plans have changed the game,” said Shah. “Retail investors are sticking to their goals instead of reacting to every market move,” he added.

Saluja also added to this, saying, “For once, retail flows are driving the market in a stable, constructive way. HNIs need to learn from that discipline.”

The bigger picture

The panel agreed that India’s wealth management industry has evolved rapidly — from product-pushing to advisory-led approaches — but investor behaviour hasn’t kept pace.

“There’s still a gap between sophistication and maturity,” said Gumasta. He considers that technology, transparency and regulation are likely to close that gap over time, but behavioural discipline takes longer.

Azeez concluded with a reminder that investing success is more about temperament than timing. “Markets will always test your patience,” he said. “The smartest investors aren’t the ones who predict the next move — they’re the ones who stay put when everyone else is moving.”

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