Leading private banks in Asia enjoyed strong net inflows and asset growth for their discretionary portfolio management (DPM) mandates in 2024, investment heads revealed at Asian Private Banker‘s DPM Leaders Conversation event in Hong Kong.

At the event, which was attended by about 100 private bank decision-makers, leading players like UBS Global Wealth Management (UBS GWM), BNP Paribas Wealth Management (BNP Paribas WM), and Bank Julius Baer, explained how their mandates benefited from strong equities performance and clients’ shift from cash into fixed income.

What is more, private banks disclosed how they are incorporating alternatives into their discretionary mandates, as well as innovative new delivery models designed to increase client penetration.

Gabriel Chan, BNP Paribas Wealth Management

“2024 was a very decent year for us, both in terms of the portfolio performances as well as net inflows,” said Gabriel Chan, head of investment services, Hong Kong at BNP Paribas WM, told delegates at the event on Tuesday.

The penetration of DPM mandates into the French bank’s Asian client base in terms of AUM stood around the mid-teen level at the end of last year, according to Chan, and it continues to increase. Around two-thirds of inflows came from clients, he continued, with the key driver of inflows being portfolio performance.

“Fixed income, in terms of … investment grade bond portfolios, worked quite well” for clients, Chan explained. “Our flagship global thematic mandates also worked quite well, which fit into the themes of investment into technology and artificial intelligence (AI).”

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UBS Global Wealth Management (USB GWM) also noted strong interest in its mandates in 2024, noting Asian U/HNWIs’ rising demand for diversification. “Our clients are increasingly aware of the importance of having a professionally managed, well- diversified portfolios. They want to have exposure to different asset classes. They want to have exposure to different regions and countries,” said Meng Li, global cross asset senior strategist, at UBS GWM’s chief investment office.

For Bank Julius Baer, the Swiss pure-play attributed its robust inflows to its astute calls on the market, which was all the more key during a year like 2024, that was characterised by equity market volatility and uncertainty over the velocity of interest rate decreases.

Ancus Mak, Julius Baer

“At the beginning of last year, we encouraged clients to stay invested with equities and bonds, which they did, and some of them actually increased their allocation,” said Ancus Mak, head of mandate advisory for Greater China. “It was not just the bank benefited from the good flows, clients also benefited from positive performance as well.”

It was not just performance and markets calls that boosted Julius Baer, but also its capacity to introduce relevant new products to clients, such as the launch of its global quality mid-cap solution last year. “We helped clients to participate in the mid cap rally [in the] second half of last year,” Mak said.

Rise of alternatives

With Asia’s wealthy clients showing rising appetite for private market investments. private banks are keen on adding varying flavours of alternative to their DPM offerings. BNP Paribas WM, for instance, is beginning to introduce semi-liquid private markets into its mandates, according to Chan.

“I think that’s a breakthrough for us, and in the medium term we’re exploring the opportunity to possibly introduce an absolute return-focused mandate that combines hedge funds and private asset investments together – which we think is an important building block for a complete, diversified portfolio,” he added.

Meng Li, UBS Global Wealth Management

UBS GWM is already significantly down the path of injecting alternatives into its discretionary portfolios. The bank’s endowment-style portfolios invest 20% to 40% into alternative assets – including real estate, infrastructure, and hedge funds – for clients with long-term investment horizons, such as family offices. “That has been very popular in the region. We have a lot of interest, especially the larger clients. Last year, we had very good performance as well,” said Li.

One role alternative assets plays in DPM portfolios, according to Li, is diversification and to help dampen volatility.  “In our flagship standard portfolio, we actively trade gold and we have hedge funds that we recommend our investors … Hedge funds are the product that you want to have in your profile in a volatile year like this,” she explained.

Mak has also seen traction in Julius Baer’s hedge fund mandate as investors look to hedge their long positions.

Innovative structures

In an attempt to drive higher DPM penetration, private banks are also coming up with innovative delivery models and structures. BNP Paribas WM introduced Crystal Fund, a UCITS-compliant DPM vehicle that allows for smaller minimum investment.

The bank’s typical fixed income mandate starts at US$5 million, whereas for Crystal Fund it starts at US$200,000. “We believe this is an important offering as it extends our DPM services to our smaller private banking clients, so that they can enjoy professional management … at a much lower minimum investment size,” Chan said.

BNP Paribas WM launched another Crystal Fund for a different mandate in late March, according to Chan. “We found the Crystal platform is much more efficient for the funds. Going forward, we look forward to launching more Crystal funds,” he said.

Julius Baer’s Mak added that the Swiss pure-play has an actively-managed certificate to lower its own ticket sizes. “After all, I think DPM should be a scalable business. So for the mandates part, we still need to uphold the minimum required investment amount,” he said.

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