Marc Lansonneur of Societe Generale Private Banking explains the role and suitability of alternative investments in portfolios, and looks at what is required to increase the take-up in Asia of the various types.
Date: Apr 2012
There was a problem with the way many alternatives were marketed to clients by all participants, he explained.
Alternatives tend to work well for those investors who have reached a certain maturity. Yet before 2008, there was appetite among various types of investors for all asset classes and many of them simply followed market trends.
As a result, they might have thought that investing in hedge funds looked appealing because of what they read in a newspaper, for instance, said Lansonneur.
Today, it is a positive situation that investors want to get more involved in understanding what they are investing in, he said.
In addition, the banks are better organised in the way they communicate with investors and ensure suitability is respected, added Lansonneur.
Appetite for hedge funds
More and more, hedge funds are offering liquidity windows to investors, said Lansonneur – some of which are daily and others weekly. This is positive news for investors, who like such visibility and the ability to liquidate their positions more quickly.
At the same time, he added, more frequent communication today helps to keep investors informed, not only about the performance of the fund, but also how the funds are positioned and reacting to any market turmoil.
Client demand for private equity
Lansonneur said there is growing appetite for private equity among HNW clients, but more in terms of “real” private equity, where the firm brings to them a specific deal involving a limited number of participants. Yet this isn’t easy to source, he added, and requires very good due diligence.
A key consideration with private equity, said Lansonneur, is to be able to hold it for the long run, often for a minimum of five years.
As a result, there must be detailed due diligence on the fund manager, he explained, for example to ensure there aren’t any conflicts of interest, and that the fund manager is investing their own money into the project, rather than just managing other peoples’ money.
Specialist investments within an alternatives strategy
Even during times of crisis, some investors remain very positive on investments in specialist assets such as art or wine, said Lansonneur, not only from a financial perspective but also psychological and personal ones.
In terms of their role in investor portfolios, he said the firm won’t include them as part of a proposal to clients. However, if a client is interested in art or wine, Lansonneur said he will discuss solutions for getting access to them.