Noah Wealth Management plans to bolster its alternatives coverage with the addition of a macro FX manager-of-manager (MoM) solution.
This comes on the back of a strong first quarter for the Chinese wealth manager, which saw a nearly 32% YoY increase in the distribution of financial products, largely driven by alternatives.
According to William Ma, CIO of Noah Holdings (Hong Kong), the firm will partner with Citi’s manager platform to selectively gain access to a handful of macro FX managers.
“Citi’s platform has conducted due diligence on over 200 FX managers globally to set up direct accounts on its platform, approving just 30 managers. Out of those 30 managers, we’ve selected 5-8 to construct our MoM portfolio,” Ma explains. He believes that Noah will become the first player in North China to launch such a solution for HNWIs.
“Our focus when constructing these portfolios will be on more tactical opportunities [within] G10 currencies, such as G10 versus EM FX trades, that use options to express views to take advantage of the low premium caused by low market volatility.”
When contacted, a spokesperson for Citi said that the bank is engaged in such conversations but can not yet share details.
Untapped FX opportunities in China
Ma believes there are opportunities within FX, noting that market volatility is poised to rebound.
“Why now? There has been a lot of noise in the market due to historically low levels of volatility and a US equity market peaking in valuations and momentum,” he says. “We believe that moving forward, volatility will return and the ideal way to capture potential opportunities in this area will be through a macro FX managers [strategy].”
However, Noah’s research reveals that the firm’s clients are underexposed to FX and that they often have a limited understanding of the full FX investment universe.
“Although we believe that FX is very important for global portfolios, our analysis of Chinese client portfolios reveals that it is a very underweighted asset class that is often misunderstood as only a means of obtaining leverage or speculation,” Ma says. “Many clients don’t understand the diversification benefits of having certain kinds of FX exposure. In light of this, we have decided it was a good time to further expand our platform by partnering with Citi to launch a macro FX MoM solution.”
Noah’s strong first quarter performance was largely driven by private equity and venture capital investments. According to Noah’s co-founder and chairman of the board of directors, Wang Jingbo, alternative investments are “becoming mainstream” for local HNW investors in China.