More than half of China CITIC Bank’s private banking branches in China have started offering their clients discretionary portfolio management (DPM) services, which the private bank launched three months ago.
A person familiar with the matter tells APB Mandate that 20 of the private bank’s 38 branches in China now have active DPM client accounts, for which all buy and sell decisions are made by portfolio managers.
Within a month of the launch of this service, CITIC had RMB 1 billion under management in DPM accounts, according to media reports. The minimum investment amount for CITIC’s DPM service is RMB 30 million.
Global allocations into all major asset classes
According to the source, CITIC’s DPM service takes a global diversified investment approach, targeting equities, fixed income and alternatives.
International asset exposure will largely be gained through qualified domestic institutional investors and the Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect programmes.
The person added that the launch and development of DPM services will help the private bank to outgrow its reliance on commission fees.
China’s DPM market has room to grow
For the most part, DPM remains a new concept among China’s private banks.
The two largest Chinese private banks by AUM, China Merchants Bank’s private banking arm and Industrial and Commercial Bank of China Private Banking, launched their DPM services in 2014.
In Asia, particularly in China, self-made high net worth individuals (HNWIs) tend to exercise a high level of control over their own investment decisions, which means Asia’s DPM penetration rate lags other regions.
According to APB Mandate data, DPM assets at private banks in Asia reached a record-high US$120 billion in 2016, a 9.3% increase YoY. This translates into a penetration rate of around 8% of total AUM. In Europe, DPM penetration rates are at least 20%.
However, clients in Asia are expected to show greater appetite for DPM services as their needs shift from wealth creation to wealth preservation.
As such, CITIC Private Banking sees DPM as a key pillar for attracting new capital from private clients moving forward.
