When football star Lionel Messi signed up with Paris St-Germain F.C., his compensation included "fan tokens" (the Club’s cryptocurrency that allows its followers to be involved in decisions) worth approx. USD 30 million. An interesting instance of ownership indeed!
"Celeb-preneurship", where celebrities are given a stake to own and market the brand, is an emerging trend. LVMH, the makers of Louis Vuitton, launched a beauty brand in 2017, giving an equal stake to Rihanna. Brands around are recognizing the importance of and creating lucrative ways to reward their resources with ownership to have skin in the game. A study found that firms that practice participative management grow 8% to 11% per year faster than they would have without them.
Employee equity is one of the most impactful tools to inspire the teams. Employees are choosing long term wealth creation over income generation via salaries. This trend is now extending to other stakeholders of the business: celebrities, consultants and even customers. We believe that companies which understand this alignment, and incorporate this in their strategies, stand to benefit disproportionately. Something for all investors to think about.
Of late, meme stocks have been a trending phenomenon for the Robinhood investors because of the online social media platforms creating hype around it. More than 33% of investors who started investing last year use social media to research investment ideas, true only for 15% for the investors who started before 2019. For the new age investors everything has shifted online and not surprisingly, they look for ownership of digital assets too.
Often bank deposits, stocks and mutual funds are instruments Gen Z associates with their parents and grandparents. They find it exciting to experiment with exciting asset classes like crypto, or investing in art through non fungible tokens, or buying limited edition collectibles.
When it comes to investing serious capital, we should first start with traditional asset classes that have a long history to take lessons from and then gradually build up the alternatives, keeping legal and taxation implications in mind. And wealth managers need to also rethink strategy to account for these new digital alternatives.
In 2014, India became the first country to mandate that companies spend 2% of their last 3 years’ average profits on CSR. Back then, it also sparked off debates if such initiatives could be forced upon the corporations or if it has to be a pure voluntary act. Both in the US and the UK, governments only nudge corporations but have not mandated it.
Since FY15, Indian corporates have spent Rs.1 trillion on CSR activities and per year the figure has doubled from Rs. 10,000 Crore to Rs. 20,000 Cr. from FY 15 to FY 21. Besides India Inc making a sizable contribution towards Covid relief, a recent example of CSR's positive impact is India's good performance in the Tokyo Olympics, where many athletes were supported by CSR projects over the course of the last 4-5 years.
We feel it's time to progress more and look beyond the CSR spends. Developing a comprehensive social return on investment framework to measure the tangible and intangible impact of such CSR spending is important. The government has already taken a step in this direction and recently mandated the impact assessment of CSR projects for certain companies and project types. It could probably be extended to entire CSR spending soon.
When gusts of wind blow over the markets so rapidly, we all need expertise to guide us through. Portfolios need to be navigated by someone whose eyes are firmly set on the turbulent seas around us. To steal from Raghuram Rajan, we do what we do, so that you can do what you’d love to. Watch this space, and you will see how we do.