In a bid to reach a wider range of clients with its discretionary offering, BNP Paribas Wealth Management has launched an actively managed certificate-based equity mandate with a minimum ticket size that is substantially less than that of a ‘standard’ discretionary equity portfolio.
A typical minimum ticket size for an equity mandate stands at around US$1 million and for fixed income, as high as US$5 million — a large commitment for those clients that have yet to delegate and therefore are looking to dip their toes in the water. Yet, by implementing the strategy via AMCs, the ticket size can be brought down to as low as US$150,000, thereby rendering DPM more accessible to a greater number of clients.
“Quite a number of clients in Asia are very concentrated in certain asset classes, and even within one asset class, they’re holding only a few positions,” Gabriel Chan, head of investment services, Hong Kong, BNP Paribas Wealth Management told Asian Private Banker, adding that a key benefit for clients is they get easy access to DPM expertise and professional managers who look after their portfolio on a real-time basis.
On the administrative side, it is also far easier for clients to subscribe to the portfolio, Chan added, pointing out that for a standard DPM portfolio, it takes a relatively longer time to open a new account.
“Additionally, because of daily liquidity without a lockup period, once clients subscribe to this AMC mandate, they can increase or decrease their holdings anytime they want,” he added.
AMCs in the context of DPM is by no means a new phenomenon in Asian private banking. Beyond easy accessibility and implementation, fee transparency is a major selling point for AMCs.
Very similar to investing in an ETF, AMC mandates charge an upfront subscription fee plus a management fee, with the latter being equivalent to the expense ratio of an ETF.
AMC bond mandate in pipeline
Having launched an AMC-based equity mandate, BNP Paribas WM is now working on a fixed income mandate that also utilises AMCs.
Chan said he expects the bond portfolio to resonate even stronger with clients in the region.
“The demand for the fixed income mandate is expected to be even stronger because it is an asset class with higher minimum investment threshold, not to mention critical to building a well-diversified portfolio,” Chan added.
“For example, it’s very difficult for a bond mandate investor to sell each of the bonds in equal proportion, as the liquidity of each bond may not be the same. But with AMCs, as investors invest by units, they can easily reduce or increase the size in a flexible manner.”
BNP Paribas WM’s latest launch comes at a time when private banks are exploring new ways to encourage client delegation, whether by introducing low-fee instruments including AMCs and ETFs, rolling out thematic portfolios, or increasing customisation options.