Winners rationale

No longer the preserve of centuries-old Swiss wealth managers, discretionary portfolio management is today a top priority for Asia’s private banks, which have slowly come round to the fact that a future dominated by transactional business is a future not worth considering. But even the best-laid plans can go awry, as a number of banks are discovering. For it is one thing to express ambition and another to deliver.

UBS understands this. For years now, the Swiss private bank has sounded the trumpet for delegation in Asia, knowing full well that under certain market conditions, its clarion call may fall on deaf ears. This perseverance is paying off, however. Internally, UBS uses a combination of top-down and bottom-up initiatives to inculcate a culture of acceptance towards DPM as a primary pillar for core investments. The bank has also made a concerted effort to internally promote the efficacy of DPM investing by providing innovative content that goes beyond traditional financial topics to include behavioural finance, big data and client advisor testimonials. And to ensure a smooth journey, UBS has added to the value chain a series of digital solutions, including a comprehensive aftersales portal, user-friendly tools to create or edit mandates and intuitive mobile accessibility.

All this amounts to little, however, if the flows and performance are not there. Again, on both fronts, UBS delivers.

In 2017, the private bank increased its APAC DPM assets by more than 40%, in the process pushing further away from the region’s industry average penetration rate of just over 9%. The private bank’s Japanese business was a standout performer in 2017 in terms of flows, tripling DPM assets throughout the course of the year. One of UBS’s flagship solutions, the Systematic Allocation Portfolio (SAP), which implements asymmetric portfolio changes to avoid equity downturns more than participation in the upside, more than doubled in asset size. And, significantly, UBS’s DPM asset growth in 2017 was not driven by outsized returns alone, with the bank registering a healthy increase in new client accounts.

When it comes to performance in 2017, UBS not only delivered benchmark-beating gains across the board, but more importantly, steadfast consistency. True, its core multi-asset discretionary mandates did not rank first in terms of absolute returns during a strong 2017 rally, but neither did they drop significantly in weaker years, demonstrating limited swings in relative performance terms on a 1, 3 and 5-year basis. Most impressively, its SAP solution not only proved effective during a lacklustre 2016 but did not significantly compromise returns in a buoyant 2017.

Testament to UBS’s strength in DPM is the fact that it headed off strong competition from almost every serious player, trumping the industry across all key criteria employed by Asian Private Banker, in what can only be described as a truly polished – and balanced – performance in 2017. This is, indeed, an accolade of the highest order and not one to be taken lightly.