Final Word 2021: Alok Saigal, head, Private Wealth, Edelweiss Wealth Management

Alok Saigal, head, Private Wealth, Edelweiss Wealth Management 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, investments, regulations, and technology in 2021, as well as providing their predictions for 2022.

The previous 12 months have proved that private banks can draw in significant amounts of net new assets and client accounts as the industry has adapted to widespread travel restriction due to COVID-19. With the potential easing of these restrictions in 2022, new variants aside, to what extent will private banks return to their pre-pandemic methods of sourcing clients and gathering assets?

The business processes across every industry have changed over the past two years. However, with restrictions waning, I believe it will gradually move back close to its original model in private banking. The ability to earn and maintain trust is much easier with in-person interactions. Some conversations will become virtual, but they will remain a much smaller fraction.

Given the majority of Asian wealth is located onshore, how should international private banks best target and differentiate themselves in these markets? For domestic regional private banks, what is the most effective strategy for competing with international players?

I believe the Indian HNWIs consider themselves as a global citizens rather than remaining tied domestically. This means they have assets in jurisdictions where they spend time for either residence, travel, leisure, education, or investment. International banks can focus on the global capital and domestic banks can focus on the onshore capital.

The last 12 months have been volatile for investors in China, from the meltdown in the high-yield bond sector to regulatory actions targeting sectors such as technology. How are you advising clients to invest in the world’s second-biggest economy in 2022?

China has always been a volatile market with sharp drawdowns and equally fast recoveries. I think, in these volatile times, it can be a good opportunity to start accumulating Chinese equities via strong fund managers and pooled vehicles. Outside the developed markets, China is the only country that can provide a lot of opportunity to the global risk capital and has the ability to absorb capital. Thus, China shall always remain a number one alternative to US equities. However, an allocation to Chinese assets should be done with at least a five-year investment horizon as current volatility could continue longer.

What will be the key investment themes that shape both global markets and those in the region in 2022 and how is that feeding into how you advise clients?

The biggest theme for global markets in 2022 is the reversal of rates globally and the liquidity tightening programme. Other parallel themes — such as the technology and start-up ecosystem in India, ESG, etc. — are equally playing an important role. We advise clients to maintain long-term asset allocation during such risky times and to reduce risk by either adopting risk management strategies or keeping dry powder handy to increase allocation during corrections. In addition, we have recommended that clients allocate 5%-10% to gold as an asset class.

One of the most-repeated views over 2021 was that the ‘60/40’ portfolio is dead, given the ultra-low to negative yields offered in many parts of the sovereign bond markets. From alternatives to commodities to private credit, how are you helping investors to allocate assets in what was traditionally the fixed income part of their portfolios?

Edelweiss Group is the largest alternative asset manager in India. So when yields are low, it plays well into the strategies which we have been running over the last decade. Each fund that we raised on the platform over the past few years has more than US$1 billion in these strategies.

Avenues besides high-grade low yield debt — such as InvITs [infrastructure investment trusts], REITS, and bullet payment bonds — provide opportunities to earn a reasonable fixed income return. With yields remaining low, the 60/40 model has moved towards a 75/25 model. People’s appetite for risk has increased and markets are rewarding risk.

Sustainability is higher up the agenda for investors than ever, with last year’s United Nations COP26 event underscoring the scale of effort needed to achieve global net zero emissions by the middle of this century. How are you helping your clients to remove ESG risk from their portfolios and embrace sustainability in their investment strategy?

In India, ESG investing is yet to gain traction. Investors would like to be high on ESG through the incidental way and not at the cost of their existing strategy.

On the other hand, many investee companies are making a meaningful effort to increase their ESG score and move towards sustainable growth. With themes such as renewable energy and electric mobility taking up more attention, investors are keen on increasing exposure to such themes that enlarge their ESG footprint.

The past two years or so have accelerated the rate of technological and digital adoption at private banks across the region, given the restrictions imposed by the COVID-19 pandemic. From hyper-personalisation to digital onboarding and KYC, what will be the biggest focus in terms of tech deployment for the industry in 2022 and where do the gaps lie?

The entire banking ecosystem needs technology investments. However, mid-office needs more focused investments. Over the past two years, many improvements have happened in reporting, client onboarding, and investment analysis. Therefore, we think the mid-office function, which provides the actual customer experience, needs more technology advancements.

Sourcing talent in the region’s private bank industry is becoming tougher than ever, pushing up hiring costs across the region. How can private banks ensure they have adequate access to the talented relationship managers and other front-line staff over the coming years? What is the key to attracting the right candidates?

Relationship managers are akin to individual entrepreneurs running their own practice. To attract such entrepreneurs we need to provide a platform that enhances their offering, empowers them, and invests in their long-term development. With every private bank trying to hire, they need to breed a fresh pool of talent in the industry catering to new funds that are being created. We need to look at pools of talent from alternative sources such as corporate banking, investment banking, management consulting, etc.

Meet 2021’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2021.


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