Given the uncertainty and volatility in the global markets, clients are getting more conservative and defensive, demanding a higher degree of transparency and yield.
Date: Feb 2012
This is leading to a change in the strategies of product offerings and in investment approaches, as well as in the conversations that relationship managers (RMs) are having with their clients.
As a result, more diversified portfolios, deleveraging and investments in local currency products like Chinese bonds are likely to be effective, while at the same time RMs should look to more actively involve their clients in the process.
These were some of the views of a panel of investment and product experts at the Hubbis Asian Wealth Management Forum 2012 in Hong Kong in early February.
Uncertain political backdrop
The global political situation has contributed to a lot of the uncertainty and volatility, the panel agreed. And looking forward, the market is facing debt crises in Europe and the US, as well as the consequences of inflation or deflation.
Based on the strong correlation seen in 2011 between market performance and politics, panel speakers said they expect the Eurozone crisis and the US presidential election to be big events to watch for 2012.
Further, political changes in other parts of the world must be factored in, for example in the Middle East, as these can directly affect oil prices and stock indexes consequently, said Paul Pong, chairman of the Institute of Financial Planners of Hong Kong.
Shift in client appetite
Against this backdrop, panel members said that clients are increasingly conservative, with safety becoming their main concern.
According to Bryan Henning, managing director and head of global research and investments at Barclays Wealth in Asia, clients are now more willing to “give up the upside to protect the downside”.
"Transparency and liquidity are dictating how [clients] are looking at things,” said Henning.
Evolving offerings and investment approaches
Since clients still expect positive returns, Stephen Corry, chief investment strategist for LGT Bank in Asia, said deleveraging and constructing diversified portfolios is the way to go. He added that scenario analysis is effective as part of this.
Selective tactical decisions should also be included in client strategies, added the panel.
In terms of yield enhancement opportunities, Alexander Kobler, UBS Wealth Management’s regional head of investment products and services in Asia Pacific, said he sees a trend in mutual funds and local currency instrument products, for instance in Singapore dollars.
Assessing the asset allocation model
For example, in China, many investors continue to focus on the short term, said Nitin Dialdas investment manager at Richmond Asset Management.
Secondly, clients may have their own investment preferences which may not be good for their long-term benefits. For example, said the panel, many clients want to put gold and real estate into their portfolios, which are not very strategic.
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