Simon Godfrey, head of products, EFG Bank Hong Kong shares his views with Asian Private Banker in ‘The Final Word’, a year in review by the region’s private banking leaders as they share their thoughts and opinions on key issues around industry trends, business performance, investments, regulations, and technology.
Investments | From a portfolio perspective, how important will (a) Chinese assets and (b) alternative investments be for delivering clients’ objectives over the next five years?
While international investors in Hong Kong and Singapore exhibit less ‘home bias’ than elsewhere, the increasing importance in global benchmarks – both equity and bond indices, as well as further financial reform and economic opportunities – should ensure that Chinese assets are attractive to our clients.
We would also highlight the positive fundamentals, such as above-par GDP growth, increasing wealth allocation by domestic households and capital market developments in the 14th Five Year Plan.
Alternative assets are increasingly a source of capital growth and income for clients that is difficult to find elsewhere. With a few exceptions, well-bid public markets have become more efficient, which means that opportunities for mainstream investors are fewer and far between. More sophisticated investment strategies can use a wider variety of techniques – trading, arbitrage, investment in private equity and debt. It will be difficult to find even high single-digit returns in public markets in general (apart from specific sector or idiosyncratic opportunities), therefore these may only be found in the alternative space. Investors need to be cognisant of the heightened risks of investing in these strategies, notably liquidity and execution risks.
Investments | What key investment themes shape your bank’s 2021 outlook — and why?
Looking forward, there are prospects for a global economic recovery in 2021, which should support corporate earnings, notably in cyclical areas which suffered in 2020. Other equity themes will see a continuation of trends, such as healthcare, the climate challenge and changing consumer habits. Active management will be able to differentiate between the winners and losers.
Within fixed income, we see little potential from investment grade rates and spreads, except in emerging markets and tactically within high yield. Risks are increasing however, with robust valuations in major markets and the positive economic outlook still being contingent on success in combatting COVID-19.
Investments | What important steps did your bank take to drive the sustainable investing agenda and to increase access to sustainable investing opportunities in 2020?
Sustainable investing has been on our agenda well before this year, though the explosion in investor consciousness has been more recent, notably in this region and we are well positioned to meet this demand. Changes in the international political landscape are also important drivers for the next year. Our affiliated asset manager, EFG Asset Management is already integrating ESG criteria into its stock selection and our global mutual fund research unit categorises funds according to their ESG credentials — which is essential when advising clients who are sensitive to these factors. We will be more visible in this space, adapting our offer to regional investment tastes and sensibilities.
Meet 2020’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2020.