Rajesh Iyer

head Wealth & Private Banking, ICICI Bank

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

For ICICI Bank Private Banking, 2022 has been a much better year, relatively speaking. Being an India-focused global private bank, we have a natural advantage due to India’s outperformance. In addition, considering the robustness of the ICICI Bank ecosystem, we adopted a cautionary stance at the beginning of 2022 and began building defences in client portfolios. That has significantly helped in protecting the performance of client portfolios, on a relative basis.

For example, as global bond yields began to rise as early as January, crossing pre-defined thresholds, we moved to a defensive bias and eventually to underweight towards equities. By end May, the market had corrected reasonably enough to re-instate a neutral stance, which has helped clients to take advantage of volatility during 2022.

Because we were very short duration earlier, some reasonable sizing in long duration has also been helpful, now that local real yields have turned decisively positive.

Over the years, we have consciously focused on “right-sizing in a theme or asset class at an appropriate time” rather than focus primarily on instrument selection. This philosophy has helped us differentiate ourselves in a market which remains largely focused on instrument / product selection.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

We are positioning 1H23 to be dominated by the ‘slowdown’ narrative and therefore anticipate some further correction in valuation multiples for risk assets. As a result, 1H23 will likely be dominated by overweighting medium to long duration fixed income portfolios. A reasonable proportion of our client portfolios has low beta ideas (dynamically managed equity oriented products, which maximize the Sharpe ratio) and that too should be helpful in 1H23.

At some point in 2023, we expect market conditions to become favourable for adding risk assets and shedding low beta exposure. It is worth noting that our investment strategy is currently not significantly influenced by geopolitical tensions. Thus, any deterioration in the situation may generally help in view of our current stance.

Because India itself is part of the emerging markets (EM)/Asia-Pacific basket, clients’ global allocations are largely centred around developed markets (DM) rather than EM/Asia, so as to provide diversification benefits, including currencies. From time to time, however, we have focused on ‘value’-centric global themes such as energy (in 2020) and gold miners (currently).

In 2022, China’s economy has been challenged by ongoing COVID-19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

With the exception of a small window of tactical allocation to Chinese equities in 2022, we have avoided any direct exposure to China, specifically China or Asian credit. Thus, the significant rise in credit spreads in Asia as well as the valuation correction in the region have not materially affected our clients. At the same time, we are keeping an eye on Taiwan, which may make an interesting case once the global economic cycle bottoms out and begins inflecting upwards.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how will private banks best combine technology with a high-touch, face-to-face service, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

ICICI Bank has always been a digital pioneer and we are committed to providing the best-in-class experience to private banking clients through all digital interfaces. Lockdown was a true enabler in this direction. We have enriched the digital stack across all touchpoints. Customers can fulfil all their banking and investment needs through our Net banking, iMobile Pay app, and WhatsApp banking channels.

Along with this, RM-initiated assisted model journeys have been digitised as well, so that customers can execute all their transactions sitting at home at ease and with peace of mind. Currently, around 74% of private banking customers are “digital login active”.

To keep pace with the ever-changing digital landscape, a number of key digital initiatives were rolled out in 2022 aimed at enhancing transaction journeys:

• Discover 2.0: A unique personal finance, expense and budget management tool to engage with customers digitally and help them manage their finances effectively;
• Video KYC: Users can complete their KYC for accounts digitally within just a few minutes through an additional mode;
• Mortgage disbursement goes digital: Once authorised, customers can continue the loan disbursement journey digitally by selecting from pre-approved properties;
• Smart Wire: Seamless inward remittances, where both beneficiaries and remitters enjoy a fully digital journey; and
• iScore: Customer scoring model, showing credit profile, existing relationship and transaction history

Such initiatives have helped ICICI Bank to win the Asian Banking and Finance Retail Banking Award for Digital Transformation of the Year – India in 2022.

Hong Kong and Singapore, Asia’s two key offshore wealth hubs, have both re-opened following COVID-19 this year, albeit on different timelines. What are the relative attractions of both cities in terms of the regional wealth industry, and has Hong Kong significantly fallen behind Singapore?

While ICICI Bank has a presence in both cities, Singapore has always been its global booking centre. And given its large Non Resident Indian (NRI) diaspora — both professionals and business families — Singapore is equally the bank’s largest marketing centre in the region. ICICI Bank remains the preferred choice of NRIs for their India-specific allocation needs. There are no plans to make any changes to the above arrangements.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

ESG has been gaining prominence as a way of life in all aspects. Yet, average investors in our context generally seek to maintain an equilibrium between ESG factors and aiming to outperform the benchmark. Thus, we have preferred a pragmatic approach of optimising ESG related factors within our instrument choices, to the extent possible without compromising the prime focus of generating alpha in instrument selection.

ESG optimisation in instrument selection implies that if one of two instruments with similar risk-rewards or expected payoffs is to be chosen, preference will be given to the instrument by a product provider / issuer with overall better ESG standards, especially in the context of governance.

Additionally, outright ESG focused investment products have been adopted at times, such as in 2020, when our equity portfolio maintained a ‘quality’ tilt — within our framework of “quality plus growth at reasonable price”.

It is estimated that 80% of Asia’s household wealth is kept onshore outside of the key wealth hubs of Hong Kong and Singapore. How do private banks best tap the potential of onshore markets?

The above ratio is much higher in the Indian context, since India is structurally a long-term growth market with consistently improving risk dynamics. Having said that, the market mood can swing like a pendulum — towards strong pessimism (as in 2013 and 2019, for example) or optimism (2014, 2017 or 2022). Because extreme swings offer investors opportunities to increase or decrease risk in their portfolios, the key is to balance these swings.

The onshore market offers investment opportunities in private markets, especially in tech-enabled new-age propositions with the potential of solving key problems. The moderation in valuations only offers a better opportunity. ICICI Bank has been playing a key role in incubating fintech startups.

Similarly, the onshore market is experiencing a positive real estate and infrastructure cycle, which is offering opportunities both to over-exposed investors to align their portfolios (offering an exit) and to other investors to take exposure to newer vehicles such as REITs and Infrastructure Investment Trusts (InvITs).

Corporate India has deleveraged significantly given the post-pandemic surge in cash flows. Now with capacity utilisation inching towards higher ranges, brownfield expansion is picking up, along with green shoots for greenfield. This is providing fresh opportunities in structured credit, an area that used to be limited to primarily institutional and family-office investors.

Yatin Shah

co-founder, 360 ONE (formerly IIFL Wealth & Asset Management)

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

We have always emphasised the need to develop a customised asset allocation strategy and have adhered to it during market ups and down. This strategy is imbued in an Investment Policy Statement (IPS), a written policy statement that outlines the unique risk/return profile of clients and captures the asset allocation strategy especially curated for them. This IPS helps to ensure that there is no deviation from the stated plan in volatile times. As a matter of fact, despite the prevailing volatility, we have been able to add value-accretive assets to portfolios.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

Against the backdrop of the events in 2022, it is worth noting how resilient India was, both from the perspective of economic stability as well as stock market performance.

As various factors ranging from regulation and policy to business environment align for India, we expect the country to create multiple opportunities for investment growth. We firmly believe that India offers a decadal opportunity for investors eager to gain exposure to the Asia Pacific region.

In addition, at least in the near-term, inflation is likely to remain more elevated. From that perspective, real assets such as Infrastructure Investment Trusts (InvITs) and REITs — where value goes up with inflation — will continue to do well.

Further, fixed-income yields are on the higher side and offer an opportunity to lock in higher yielding assets. Credit demand is strong and the environment is fair for investments in credit with adequate safeguards. Gold-related investments can form around 5% of the overall portfolio as a means of currency protection.

We have an underweight stance on equity and suggest cash available be deployed in a staggered manner over three months. Within equity, we recommend allocating around 30% to mid-caps. Around 15% can be invested in international equity.

In 2022, China’s economy has been challenged by ongoing COVID-19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

Our clients concentrate on India and our key focus is therefore the growth and potential in India. However, if we were to discuss the potential in India vis-à-vis China, our general thought is that currently India is in a good position to play a larger role on the global stage, especially in the case of trade.

Due to ongoing political tensions and the need to diversify supply chains, many countries across the world are considering adopting a “China plus” strategy aimed at de-risking their supply chains and trade function. India will inevitably be a beneficiary of this trend.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how will private banks best combine technology with a high-touch, face-to-face service, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

Even before the onset of the pandemic, digitisation was gaining traction across industries. The pandemic only served to accelerate its adoption. In this rapid race to digitisation, financial institutions have been increasingly embracing technological solutions.

Yet, financial services, especially wealth management, cannot do without human interface and personalisation. In that sense, the future of financial services is really ‘phygital’, where decision-making continues to be primarily face-to-face with the relationship manager, while technology is harnessed for specific functions — such as operations, a more efficient service delivery, and cutting-edge portfolio and performance analytics.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

Without a doubt, ESG as a theme is gaining traction among institutional and HNW investors. As the public at large and investors are becoming sensitised to the sustainability needs of the planet, they are more conscious about whether their wealth is part of the problem or the solution.

The geopolitical events of 2022 may have temporarily caused a resurgence of traditional fossil fuels, but the long-term trajectory for humanity has to be towards cleaner energy sources. A brief hiccup is unlikely to detract long-term oriented investors from their focus on ESG-related investments.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

While enhancing our digital and automation capabilities to champion future business growth, we keep looking for the right talent to help us build our current and new business lines and expand our geographical footprint in Tier I and Tier II Indian cities.

We seek talent that can live our values every day. Specifically, people who are client-centric in their work ethos; who are entrepreneurial, risk conscious and people-oriented; who are rigorous and right in letter and spirit; and who are change champions. In 2023, we will adopt a structured approach to introducing psychometric based assessment tools to hire from universities.

In addition, we focus on reskilling and upskilling existing employees, through structured learning journeys. When assessing talent, we take into account their track record, functional capabilities and potential.

Omar Shokur

CEO Asia, branch manager Singapore, Indosuez Wealth Management

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

This has been a very difficult year for most asset managers and private banks, with mounting hazards inflicting damage on portfolios and dampening investor confidence. In order to navigate these headwinds, we are intensifying client engagement by ramping up our communication channels in both traditional and digital ways.

In terms of portfolio management, we have added more alternative markets and private equity investments — which have better diversification and yield enhancement effects than the more traditional assets, particularly in this high inflationary and high volatility environment. For instance, our semi-liquid private equity investment offers an interesting opportunity for clients while mitigating liquidity concerns. Active management paired with a high level of customisation offers the optimal way to protect clients’ assets and engage with their interests, and importantly helps clients remain focused on their long term investment objectives.

In parallel, it is important to point out that the ongoing stability of our Crédit Agricole Group during this volatile year, and its strong financials provided added reassurance to both current clients and prospects.

As such, we have been quite successful in capturing new clients as well as increasing our market share with top clients. This has led to a good trend of net new assets at Indosuez WM in 2022.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

Investors will remember 2022 as an exceptionally tough year to navigate in most market segments, on the back of rising interest rates cycles globally, high inflation, geopolitical risks and supply chain disruptions.

This then sets the stage for 2023 as valuations look appealing for many, but we believe the strong volatility is likely to remain. We anticipate that 2023 will be a good year for bond performance — we have already started to witness this emerging trend with rising fund flows, curve flattening and spread compression. We favour developed markets investment grade (IG) bonds with very short maturities, which have high relative value and an attractive spread versus the high yield (HY) segment. We would add the ultra-long part of the treasury curve as a macro hedge while recession looms.

We maintain a neutral /underweight stance on equities for now, while focusing on high dividend and quality stocks. Forex diversification will add value because the current dollar strength should fade in 2023. With regards to Asia, we take a two-pronged approach by maintaining a neutral stance on China on the one hand, and a positioning in beneficiaries of the reopening and cyclical demand plays (such as India, ASEAN countries as well as Australia) on the other.

In 2022, China’s economy has been challenged by ongoing COVID-19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

Apart from a challenging global environment, tightening financial conditions, rising inflation and geopolitical tensions, Chinese markets have been extremely difficult with a government-led deleveraging process in the real estate market and a strict zero-COVID policy which dampened investor sentiment and consumer confidence.

China’s zero-Covid has started to shift very recently, and while this transition from zero-Covid to mitigation may be bumpy in terms of growth and earnings recovery, recent developments have improved the overall earnings and valuation outlook relative to what we saw before November 2022.

Therefore, when investing in China markets, we still keep long-term investing in mind, and we are waiting for a potential reopening into 2023, whilst monitoring (and enhancing) portfolio risk management. We avoid taking excess risks in the China real estate markets, especially in HY fixed income. Specifically, in China real estate we have a clear preference for the high quality SOEs rather than private developers.

Risk management, liquidity control and portfolio diversification made a substantial difference when investing in China in 2022 and this trend is likely to continue. During 2022, we diversified away from consumer/cyclicals and added exposure to the defensive sector and selectively into long-term beneficiaries of central government policies — such as renewable energy, electrical vehicles, and solar energy, to name a few.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how will private banks best combine technology with a high-touch, face-to-face service, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

More so than in any other banking segment, private banking remains a highly personal service where the personal touch remains key. With the pandemic receding, we are likely to increasingly move towards a pre-pandemic approach. Still, we foresee that client-bank(er) interactions will shift at least somewhat towards a more hybrid model, with a combination of digital and in-person contact points. That will benefit clients, while allowing banks to offer improved services, both qualitatively and quantitatively.

At Indosuez, we will keep investing in our e-Banking and M-Banking tools, which should allow clients to have access to more features in 2023. This is a key area of focus for us.

Hong Kong and Singapore, Asia’s two key offshore wealth hubs, have both re-opened following COVID-19 this year, albeit on different timelines. What are the relative attractions of both cities in terms of the regional wealth industry, and has Hong Kong significantly fallen behind Singapore?

The competition between Singapore and Hong Kong seems indeed to have intensified somewhat which is, in the end, a good stimulus for both sides to keep improving and keep pushing for ever higher standards for the industry as well as looking for appealing and innovative ways to attract talent.

In my opinion, neither city would be where it is now in the absence of this coexistence which pushes them to aim higher. Hong Kong might have struggled a bit in 2022 but we believe it will come back with a bang once mainland China opens up.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

The ESG journey is a marathon, not a sprint. The global challenges, such as “Net Zero targets”, will have a tremendous impact on many companies around the world. Industries such as fossil fuels are among the most concerned ones. Some companies are embracing (or will embrace) ESG-related changes faster than others. Although the short term impacts might not be obvious as yet, we are convinced that once these traditional industries embrace ESG, and the associated targets, it will make them more attractive investments in the long run, and as such create more shareholder value.

ESG has been an essential element when advising clients and this will remain so, if not even grow in importance. Our job will be to help clients understand ESG-related investments and assess their potential.

It is estimated that 80% of Asia’s household wealth is kept onshore outside of the key wealth hubs of Hong Kong and Singapore. How do private banks best tap the potential of onshore markets?

While much wealth is indeed located onshore, a fair amount of wealth from HNWI’s and UHNWI’s will remain offshore, which is the target market for international private banks. The offshore model remains strong and attractive for both private banks and clients alike on the back of the sheer depth and breadth of the talent pool in offshore wealth centres such as Singapore and Hong Kong, the regulatory environment, the technological infrastructure, the availability of sophisticated products and structures, the legal framework etc.

In addition, onshore and offshore are not mutually exclusive solutions for Asian HNWI/UHNWI. Clients might need both an onshore bank, for more local needs, and an offshore partner to manage their international needs.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

2022 was a strong year for us in terms of attracting senior talent in various areas. Most notably we managed to add significant bench strength to our front office. We have a strong focus to grow in this dynamic region and for 2023 we intend to focus on successfully integrating these new colleagues into the organisation, while continuing our drive to find and attract the best and brightest in the industry.

Just as importantly, we will remain steadfast in our emphasis on the development and growth of the current talent.

Lastly, as earlier mentioned, we have been able to attract net new assets in 2022. With the arrival of these new talents and with the support of our existing teams, we plan to build on 2022’s positive trend to increase assets in 2023.

Jimmy Lee

member of the Executive Board, Julius Baer Group Ltd and head Asia Pacific

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

In the ten-month reporting period, Julius Baer was effective in counteracting the market-driven decline in assets under management with a meaningful improvement in its gross margin. We recorded assets under management of CHF 429 billion as at 31 October 2022 globally. We saw an improvement in net inflows, which started towards the end of 1H22, and strengthened in the subsequent four months, despite some further client deleveraging. We achieved year-to-date net new money inflows of CHF 3 billion.

Amid the challenging market conditions in the last 12 months, we remained focused on serving HNW and UHNW clients well. Our pure-play business model enables us to be completely focused on wealth management and this differentiates our brand as it allows us to maximise resources for the benefit of clients. Clients work with us because we are resourceful and collaborative, and we offer them bespoke solutions. We are agile and work fast, with teams empowered to make quick decisions. Additionally, we are able to connect across generations to facilitate the dialogue needed for the generational transfer of wealth, which is so important for Asian clients today.

We are living in a complex and fast-paced world and for the first time, amid inflation, we are seeing monetary policy tightening incredibly fast. Clients across the board in Asia have been tactically holding back investments. We work closely with clients to deploy at the right entry points, and by staying close to them, we find opportunities that align with their risk appetites, something which they value deeply.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

We are aware of the high volatility of inflation, interest rates and markets. As the world enters an era of inflation, we suggest long-term holdings of stocks that can generally resist inflation. At the same time, we are convinced that real estate and private equity funds are good investment tools to hedge inflation. We also think that growth and inflation dynamics will likely be the dominant drivers of investor risk appetite into 2023

Looking forward for the APAC region:

• We remain positive on Southeast Asia, given its strong macroeconomic growth outlook, resilient corporate earnings and high proportion of local currency denominated debt, which should insulate it from the vagaries of US interest rate movements. Meanwhile, a busy election calendar — with elections in Malaysia, and upcoming in Thailand and Indonesia — could herald new leadership and potentially regime changes, creating both opportunities and risks. The region stands to benefit from a potential shift in fund flows, should the move among major public pension funds in the US to cut their Chinese equity allocation, gain traction. In terms of pecking order, our preference is for Singapore and Indonesia over Thailand, Malaysia, Vietnam and the Philippines.
• The improving outlook for North Asia, anchored by early signs of an easing zero COVID-19 policy in China, could reverse the direction of incremental capital flows and channel it north. We believe that the recent “pandemic policy pivot” by the Chinese leadership will likely lead to a reopening optimism and fuel a year-end rally in the market.

In 2022, China’s economy has been challenged by ongoing COVID-19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

Our global strategists believe that growth and inflation dynamics will likely be the dominant drivers of investor risk appetite into year-end, but despite expected volatility, headwinds for risk assets should eventually ease. It may be perplexing that we still recommend that investors stay invested, but we are convinced that we are currently in an “expansion” regime, where staying invested is the way to go.

In China, we believe that the recent “policy pivot” by Chinese authorities — where a clear shift to pandemic policies was made — will likely help fuel a year-end rally in the market. Policies towards China’s property developers have been meaningfully relaxed, which should alleviate their financing challenges. In our view, these measures will probably mitigate market concerns of the “left-tail risk” in the Chinese economy and drive a recovery in market valuation.

Looking into 2023, Julius Baer still favours ‘alpha’ (individual stocks and sectors) over ‘beta’ (overall market direction) as the primary source of investment returns. We like three main themes: the environment (renewables and electric vehicles); the high-end manufacturing segment (semiconductors and industrial automation); and mass-consumption stocks (beverages and sportswear). We also prefer A-shares over H-shares over the long term, as the former has a stronger growth tilt and larger exposure to policy beneficiaries.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how will private banks best combine technology with a high-touch, face-to-face service, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

We strongly believe the winning formula for the future of the private banking business combines distinct human factors with technology. Having said that, personal connections will always play a lead role at Julius Baer, as they become enriched by technology and digital advancements. The magic of Julius Baer’s business model lies not in the competition between personal connection and technology, but in their integration.

We are developing our technology footprint to give clients seamless digital access to our banking services. At the same time, we are investing to make our human model more scalable, giving our relationship managers more time to serve clients by automating manual processes amid the high complexities of wealth management.

For 2023-2025, Julius Baer plans to invest CHF 1 billion in financial technology to provide and develop more business solutions, enhance the scope of digital channels, and upgrade e-banking capabilities. These investments will continue alongside the expansion of external technology partnerships, which encourage collaboration in open architecture solutions.

By investing heavily in technology, we aim to enhance the client experience, especially since our client base is transitioning to a younger generation who may prefer to be engaged on digital platforms.

Offering guidance at an accelerated rate will remain a key strategy to enabling sustainable growth. Investors’ increasing interest in ESG, robo-advisory, and crypto assets also present opportunities for new digital platforms to bear innovation.

The industry must adapt to these trends, which are requiring more agile and digitally enabled private banks. To this end, we have established an innovation lab in Singapore. First of its kind at Julius Baer and housed in a dedicated space within our Marina One office in Singapore, Launchpad aims to catalyse change by bringing the outside in. It serves as an incubator for colleagues, clients, partners, start-ups and experts to collaborate, develop and test disruptive solutions.

Hong Kong and Singapore, Asia’s two key offshore wealth hubs, have both re-opened following COVID-19 this year, albeit on different timelines. What are the relative attractions of both cities in terms of the regional wealth industry, and has Hong Kong significantly fallen behind Singapore?

Our position in Asia Pacific is reinforced through our two regional hubs of Hong Kong and Singapore, while we drive growth in Greater China, Southeast Asia and India.

Hong Kong and Singapore pursue independent regional growth strategies, have different geographic roles to play and bring to the bank their own unique talent bases. We hire the best crew in both locations to serve our client base. Hong Kong is the centre of gravity for North Asia and offers proximity to mainland China and the Greater Bay Area. Singapore, as an important banking hub for Southeast Asia, is increasingly seen as a technology hub and this is where we house our technology back-office and innovation lab. Both locations have great synergies for us and will remain key hubs as we expand in the region.

With Asia as our second home market, we will focus on capturing the inflow of business in this region, as we invest and sharpen our local value proposition through our two hubs with a global network of experts to capitalise on regional growth opportunities and create value beyond wealth for clients.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

The energy crisis and high oil prices have reinforced investor belief that renewable energy and electric vehicles are the way forward, heightening interest in renewable energy and energy efficiency-related investments. Despite the recent market malaise, we saw net inflows into our preferred future energy fund.

Most of the investors in our sustainable thematic/impact aligned funds believe in the long-term prospects of the underlying themes and want to make an impact with their capital, and so are less likely to pull their capital from these investments when market volatility picks up. Interestingly, within our stable of non-thematic equity funds, the ESG focused strategies held up better in the recent downdraft, as they did back in 2020, and saw net inflows.

We see amongst our client base a particular interest in the governance aspect of their investments, as well as investing in future trends which will have a positive impact, such as smart mobility, nutrition and energy transition. We believe that our offerings — a variety of solutions covering different asset classes and themes — will keep drawing interest from clients and that this, in turn, will help to support and grow the market.

It is estimated that 80% of Asia’s household wealth is kept onshore outside of the key wealth hubs of Hong Kong and Singapore. How do private banks best tap the potential of onshore markets?

Having a well calibrated onshore strategy is important, in light of the diverse characteristics in different wealth markets in Asia, which are also in different stages of economic and regulatory development. Our operations in Asia represent a significant part of our global business and we have been growing our footprint in markets such as Southeast Asia, India and Greater China.

Domestic markets will see continued wealth creation. Onshore wealth growth presents the most significant opportunities for the wealth management industry and for that reason we are focused on establishing a strong presence onshore where it makes sense. Our presence and activities in key markets of the region are complemented by dedicated local partnerships with Siam Commercial Bank (SCB) in Thailand, and Nomura in Japan, where Julius Baer was the first bank to work with an established local partner in setting up a joint venture with a large team on the ground.

With 80% of wealth sitting onshore in Thailand, and since the Bank of Thailand began encouraging a regulatory stance towards offshore investments, we have seen even stronger growth in this market. We have the first mover’s advantage, having been one of the first international private banks to establish a presence through a strategic joint venture with SCB in 2018. The joint venture has allowed us to provide relevant and impactful advice and solutions to the growing Thai private banking market and its increasingly sophisticated clients. It combines SCB’s strong brand credibility and wealth management expertise with Julius Baer’s full suite of international wealth management capabilities and advisory services. Today, we have the largest platform in Thailand, where we are committed to bringing top-class solutions. In addition, we have been the first to bring international discretionary portfolio solutions to Thailand.

In Japan, we noticed that clients have a strong affinity with Swiss culture, and a desire to invest offshore. Julius Baer Nomura Wealth Management Ltd, equally established in 2018, allows Julius Baer to introduce our bespoke discretionary mandate services to Nomura’s high net worth client base in Japan, complementing our comprehensive domestic product offering with our tailor-made international mandate services.

With regards to China, we announced in September 2022 that we have become a strategic investor and business partner of GROW Investment Group (GROW). Through this unprecedented partnership, we now have a compelling opportunity to amplify our leading capabilities for domestic clients in China. We are taking a first step into onshore China and at the same time, GROW’s clients will gain access to our global investment expertise.

India is a core market for Julius Baer and we have made several key appointments to help drive our growth strategy and focus on building up a major presence in our NRI teams around the world, as well as onshore in India. Led by Rahul Malhotra, head Private Banking Global India & Developed Markets, we have ramped up the recruitment of front-office staff and keep investing in people. A recent key appointment was Umang Papneja as the new CEO for Julius Baer India. His deep onshore knowledge and network will help drive our growth strategy, aimed at building up a major local presence by extending our reach into more key cities in India. Currently, Julius Baer is present in six cities across India — Mumbai, New Delhi, Chennai, Bengaluru, Hyderabad, and Kolkata as the latest addition. The plan is to expand to more than ten cities in five years’ time to reflect the national nature of India’s wealth growth. India onshore is among our top 10 markets across the globe and we have ambitions to expand. We are in the process of implementing a five-year business transformation strategy.

We will continue to develop the businesses in our key hubs and strengthen our presence in the onshore market to capitalise on the growing wealth opportunities in Asia.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

We will keep hiring top talent in the wealth management industry, investing in growing our senior relationship manager base and harnessing the next generation of up-and-coming relationship managers, and other specialists such as investment advisory and wealth planning teams. As we grow our presence in Asia, it is vital to hire the right professionals in the market to support our front-office colleagues and maintain our competitive edge in providing best-in-class wealth management solutions to clients.

Equally important is investing in upskilling employees and growing our internal pipeline of talent through the well-established, in-house Julius Baer Academy. We are constantly looking at ways to meet tomorrow’s needs and have created new role profiles and career pathways — such as junior relationship managers or account managers — to groom talented experts.

We will use our strong employer brand to attract top professionals in the market and seek to hire people that best fit our culture. We value the individual qualities everyone brings that enables them to be impactful, entrepreneurial and empowered, so that they can work in close partnership with clients.

Michael Blake

Asia CEO, Union Bancaire Privée

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

From a client perspective, investors were largely in risk-off mode throughout the year, showing limited appetite to rebalance portfolios, limited appetite to add risk and increased appetite to increase cash allocations. The business mix in 2022 reflected these trends, with reduced transactional activity offset by higher net interest income.

From a net new money perspective, NNM inflows continued from across our principal markets of Greater China and ASEAN, as well as strong inbound inflows from the Middle East and other international markets into Singapore, looking to access Asian-focused investment expertise.

From a strategic perspective, we focused on three priorities in 2022:

• Develop China: In June 2022, we established a new office in Hainan and secured a qualified domestic limited partnership (QDLP) licence allowing UBP to offer global investment strategies to qualified domestic investors. This made UBP the first Swiss wealth and asset manager to open an office in Hainan under the QDLP programme. We are now in the final due diligence stages for our first fund launch.
• Build Alternatives Capabilities: in 2022, we have seen client demand in two principal areas: pre-IPO opportunities at deep market discounts; and government real estate, a UBP strategy which offers exposure to properties on long-term lease to public bodies in the US and Europe. In addition, we are expanding our hedge fund coverage to family offices in Hong Kong and will appoint a hedge fund advisory head in Asia in 1Q23 next year.
• Play up FX capabilities: the market volatility made 2022 an exceptional year for FX, with volumes and revenues doubling year-on-year.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

Perhaps the biggest consequence of the challenges encountered in 2022 is in the bond market which now, for the first time in more than a decade, offers investors reasonable risk-adjusted returns. High quality bonds yield 6% for the first time since the 2008 Global Financial Crisis, offering investors a cushion from high coupons to weather the ongoing economic, geopolitical and policy uncertainty.
Looking to Asia, emerging markets generally and China specifically are at a different point in the economic cycle than the developed world, emerging from recession. As a result, investors can benefit from this cyclical recovery by investing alongside the policy stimulus that is being delivered to strengthen the recovery momentum in 2023. We expect investment in energy transition to be at the forefront of this policy effort in Asia Pacific, providing a tailwind for investors in 2023.

In 2022, China’s economy has been challenged by ongoing COVID-19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

China’s economic growth will likely recover to around 5% in 2023, after registering below-potential growth in 2022. This economic recovery will be driven by a gradual reopening, as the country pivots out of its “Dynamic COVID-Zero” policy from 2Q23 onwards. The authorities have also announced measures to support the housing sector and we expect monetary and fiscal policy stances to remain accommodative in 2023 — against a backdrop of policy tightening virtually everywhere else in the world.

Although headwinds surrounding COVID-19 and the housing sector still pose challenges, the cyclical recovery should provide support for Chinese equities in the quarters ahead. Equities look attractive on a relative basis, while we observe fewer downside risks on the earnings front. However, investors need to consider that the investment paradigm has changed in the new era of “Common Prosperity” and they should look to generate returns over a longer investment horizon.

Stabilising the housing sector will require time, so we maintain a more selective approach and gravitate towards higher quality bonds and short duration on the fixed income front.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how will private banks best combine technology with a high-touch, face-to-face service, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

Five years ago, technology’s impact on wealth management was presented as a zero-sum game, as a binary choice between digital or human engagement. The debate has clearly matured and we see a hybrid future, where technology enables richer conversations with clients.

This may encompass digital communication channels, involve AI-assisted investment insights and asset allocation, or simply be about removing some of the pain factors in the way that clients interact with banks. More precisely targeted technology can have a transformative impact on client relationships by supporting, rather than removing, the role of the relationship manager.

For the mass affluent wealth business, there is a much stronger argument for a lighter touch but higher volume model which is largely digitally driven. However, for pure-play private banks, human interaction remains the core around which we build, so we see technology as an enabler, boosting our proposition, enhancing our investment capabilities and improving delivery.

Hong Kong and Singapore, Asia’s two key offshore wealth hubs, have both re-opened following COVID-19 this year, albeit on different timelines. What are the relative attractions of both cities in terms of the regional wealth industry, and has Hong Kong significantly fallen behind Singapore?

Growth rates in both the Hong Kong and Singapore businesses remained robust in 2022 and we see continued demand from clients across both locations.

While it is natural to compare the two financial centres, we do not see this as a zero-sum game, where one centre loses if the other wins. Both have distinct advantages that position them well for future growth.

Singapore has been highly successful in attracting new capital inflows from both within the region and from other regions in 2022. Clients appreciate the Lion City’s stability, its progressive approach to business, its status as a regional business hub and the many lifestyle and education attributes that befit a word-class international financial centre. An increasing number of global wealthy families and their family offices see Singapore as a must-have link in their global set-up, both as a dependable booking centre and as a source of expertise for the allocation of assets in Asia.

Despite recent challenges, Hong Kong’s future prospects remain bright for three reasons. First and foremost, geography matters and Hong Kong’s proximity to mainland China — with 1,000 billionaires, 6 million millionaires and a wealth pool of US$85 trillion — makes it the first stop for many wealthy mainland Chinese. Second, mainland China will still need an international finance centre to facilitate international capital formation and deployment. For as long as the RMB is not convertible, Hong Kong will play this critical role for the mainland Chinese economy, to the direct benefit of its wealth and asset management businesses. Finally, and perhaps most importantly, innovation and agility are in Hong Kong’s DNA — the city has a track record of adapting to market opportunities. The major opportunity on Hong Kong’s doorstep is the Greater Bay Area — with an economy the size of Canada — and the next chapter in the growth of Hong Kong’s wealth management industry will depend, in part, on the extent of capital mobility within this economic zone.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

We see increasing client interest in sustainability, particularly from quasi-institutional clients. Even with geopolitical risk, market volatility and a challenging backdrop of inflationary pressures, UBP’s Impact strategies experienced encouraging flows year-to-date, especially in our Positive Impact Emerging Equity solution.
In the short term, we see a depth of opportunities in the social themes that have experienced so much disruption during the COVID-19 crisis. Education and financial companies — particularly in microfinance — are still in the process of returning to their normal levels of profitability and, in some cases, can even benefit from higher interest rates. This creates an opportunity for investors.
In the longer term, the need for more sustainable business models is not about to abate. Emerging markets (EM) are home to many companies providing solutions in the fields of electric mobility, renewables and energy efficiency. Moreover, basic infrastructure, water and electricity, along with financial inclusion can be more easily accessed in EM than in other markets, presenting a broad range of eligible investments to investors in EM equities.

It is estimated that 80% of Asia’s household wealth is kept onshore outside of the key wealth hubs of Hong Kong and Singapore. How do private banks best tap the potential of onshore markets?

Our primary focus in Asia remains on providing global wealth management advice from the international financial centres of Hong Kong and Singapore. We see enduring strong demand for international wealth advice — the majority of wealthy clients have multi-jurisdictional needs, many have a nexus in Hong Kong, Singapore, London or Switzerland and they appreciate the full range of services that can be offered from both hubs.

In addition to this, we established a new office in mainland China in 2022, underscoring the size and future potential of the mainland China wealth management market. Our focus here is on providing domestic investors with investment solutions for the global component of their overall asset allocation, utilising the QDLP scheme.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

From a market perspective, we may expand coverage across our traditional markets of Greater China, Singapore Domestic, ASEAN and NRI Asia. We also see opportunities to add to our teams covering international clients and Greater China markets from and in Singapore.

From an RM perspective, our focus remains on working with like-minded professionals who share our commitment to investment excellence and are looking for a bank that combines the flexibility of a family office with an institutional-grade product platform and balance sheet.

Over the past five years, we have found particularly strong alignment with RMs who have between 10 and 20 years of experience, who want to work with a bank where they can manage clients and, if they wish, build a team. They are attracted by our balanced commercial approach, flat hierarchy and freedom to build long-standing relationships with their clients.

Chew Mun Yew

head of group private wealth, UOB Private Bank

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

This is not the first crisis we have weathered together with our clients — and it will not be the last. We have been active in hand-holding our clients and providing them with timely updates to build resilience into their portfolios for the long term. We have constant conversations with them, and take the time to understand whether the circumstances they face have changed as a result of market conditions. Based on this, we re-assess clients’ priorities and risk appetites, and customise our next course of action to ensure that they fit our clients’ needs.

We will advise clients on opportunities present in the markets despite the economic volatility. We will help them re-balance their portfolios, and give recommendations based on prevailing market conditions — such as terming out bond investments to take advantage of the rising interest rate environment.

Our AUM and revenue have been resilient despite negative market action, and we expect growth of 4% and 25% YoY respectively.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

Diversification and robust asset allocation are imperative to manage macroeconomic and geopolitical challenges. Inflation in the developed world looks as if it has peaked, with further upside risk to rates likely to be limited. As rate risks recede, recession risk will probably loom larger, so high quality bonds will act as a portfolio stabiliser. On the same note, we suggest extending the duration for bonds, which are expected to have a positive return after a sharply negative year in 2022.

An elevated risk of recession would justify investments in defensive sectors such as healthcare. We see opportunities in some oversold growth sectors and regions with divergent monetary and business cycles — such as in China and the ASEAN region, which are in a better position to withstand a US recession.

In 2022, China’s economy has been challenged by ongoing COVID-19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

Following China’s 20th Party Congress in October 2022, the Chinese government has taken more aggressive steps to support the economy by assisting real estate developers in refinancing their debt through bank loans and state-backed bonds, with the People’s Bank of China stepping up its easing efforts. In addition, China has commenced a gradual pivot away from zero-COVID policies, although a more decisive easing of COVID-19 restrictions can only be possible if more of its elderly population are vaccinated.

Much of the investment risks in China has been priced in, and the risk-reward in the next six to 12 months is positive. We are adopting a measured approach towards China, and remain cautiously optimistic about its prospects, especially with the news of gradual relaxation of COVID-19 controls.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how will private banks best combine technology with a high-touch, face-to-face service, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

Future engagement modes are likely to include a combination of face-to-face interaction, with digital capabilities to enrich the experience. Our focus is on RM-assisted and data-driven advice, which will help our bankers to more effectively engage clients and gravitate towards a high-quality portfolio based on the bank’s house views.

Learning from our experience during the pandemic, the focus will be to draw on the strength of the digital capabilities of UOB’s Group Retail Bank to equip our bankers with the right digital tools and data analytical capabilities — such as automated name screening, investment views, clients’ portfolios and preferences, and risk and compliance agendas. With these capabilities, our bankers will be equipped with accurate and timely information anywhere, anytime.

Specifically, UOB Private Bank seeks to introduce self-service capabilities centred around what clients can do with their investment portfolios, in addition to what they already do on UOB TMRW (the bank’s all-in-one banking app) and the Personal Internet Banking platform.

Hong Kong and Singapore, Asia’s two key offshore wealth hubs, have both re-opened following COVID-19 this year, albeit on different timelines. What are the relative attractions of both cities in terms of the regional wealth industry, and has Hong Kong significantly fallen behind Singapore?

Hong Kong and Singapore are appealing capital markets that have attracted foreign investments over the past few decades. Hong Kong will always be an important wealth hub in Asia, with its economy set to be even more closely integrated with China through the Wealth Management Connect scheme. Hong Kong will remain competitive in its own right, as the preferred destination for offshore wealth from Chinese clients.

Singapore has benefited by being a globally neutral financial centre, and has maintained its pre-eminent status as a wealth hub thanks to its political and economic stability. Singapore has historically attracted a more ASEAN clientele, but has more recently seen healthy inflows from North Asia. According to a report by the Monetary Authority of Singapore, hedge fund assets under management in Singapore witnessed the largest increase on record last year, jumping 30% YoY to SG$257 billion. In addition, Singapore’s successful management of the pandemic has enabled a more accelerated reopening, which has boosted its economy as well.

Singapore competes on different strengths from Hong Kong, and will remain the key gateway to ASEAN and rest of South Asia.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

ESG investments will remain an important area of focus due to client demand as well as regulatory expectations. However, an ESG-tilt as a sustainable alpha source remains debatable, with regulatory scrutiny in the use of ESG labels in financial products having been tightened in 2022. It is important to keep engaging clients on such conversations through regular specialist sessions and investment insights correspondence.

It is estimated that 80% of Asia’s household wealth is kept onshore outside of the key wealth hubs of Hong Kong and Singapore. How do private banks best tap the potential of onshore markets?

UOB has full onshore banking licences and wealth management centres in almost all ASEAN and selected North Asia countries. In addition, UOB Private Bank has the advantage of being part of a larger banking group, and our onshore consumer banking franchises can tap on such opportunities. Together with our recent acquisition of Citibank’s retail franchises in Indonesia, Malaysia, Thailand and Vietnam, we are able to tap the onshore wealth markets and scale the business in a more effective manner.

Today, UOB can serve Private Bank clients across Asia with both onshore and offshore opportunities being continuously explored across various business units to ensure ‘total banking solutions’ that meet clients’ banking needs.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

We have hired strongly in 2022, adding over 40 bankers. As we expand our product and service capabilities, we are always on the lookout for new frontline staff with diverse backgrounds, experiences and skill sets to augment our talent pool. Experienced leaders and RMs with strong followers are prioritised, but we will also positively consider less experienced RMs with good track records.

That said, we are strong believers of “growing our own timber”. We invest in future leaders by training them, providing them with the right tools to succeed in their new roles and creating career paths for them to take on more responsibilities and leadership positions over time.

Specific to middle- and back-office, it is challenging to find staff, especially with relevant experience in risk, compliance, and newer fields such as data analytics application. For that reason, we are training existing staff who are open to a change in roles, to re-learn and make use of their existing experience in new areas. For example, we have had front-office staff successfully transiting to new roles in Know Your Customer due diligence and Business Risk Management. And they are excelling in their new positions!

Amy Lo

co-head Wealth Management Asia Pacific, UBS Global Wealth Management; head and CEO, UBS Hong Kong

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

We believe that volatility is here to stay and that diversification will be the key.

We see a year of inflections ahead and investors should diversify and seek recovery themes. We anticipate opportunities in alternatives, in particular private markets in the longer term, to grow exposure to secular trends of the decade ahead — such as digitalisation and energy security.

In APAC, the low valuations across Asian markets opens opportunities across major asset classes, such as select early cyclicals in South Korea and Taiwan, quality investment grade (IG) bonds, and winners in the era of security. While 2023 should begin with a growth slump for APAC, things should improve with a turning point for growth expected in 2Q23. We expect a moderate mid-year recovery to help Asia expand by 4.4% in 2023.

Especially when the environment is uncertain and volatile, we stay close to clients to help them diversify portfolios through various innovative solutions.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

Despite the market volatility, we believe the interest in ESG solutions will only rise. The trend is here to stay, due to a number of drivers, such as inflation, the energy crisis, climate change concerns, and a greater regulatory focus on transparency and compliance. The rise of ESG has significant implications for the talent, leadership, investment and governance of an organisation.

As the world’s largest wealth manager, we were the first financial institution to make sustainable investments the preferred solution for private clients investing globally in 2020. In fact, by offering a range of sustainable investing opportunities for sustainable growth, the whole industry plays a pivotal role in helping investors to be part of the change.

We have been advising clients to stay diversified across asset classes and regions, identifying opportunities through the sustainability lens. Since its launch in 2018, our flagship sustainable investing cross-asset discretionary mandate has seen significant growth in assets in APAC. The mandate has been able to outperform its benchmark in the past three years.

We will broaden and deepen our solutions to cover more ESG thematic strategies, allowing clients to pursue sustainable investing with greater choice and diversity, which is what UBS’s purpose is about.

August Hatecke

co-head Wealth Management Asia Pacific, country head UBS Singapore, UBS Global Wealth Management

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

No doubt it has been a volatile year, but what keeps UBS ahead are two key differentiators — seamless services and innovative products.

In 2022, clients looked to us to help manage and protect their wealth during uncertain times. For UBS, the Asia Pacific region remains a key region for the global wealth management business. The 3Q22 results showed that the Net New Fee Generating Assets in APAC contributed to half of our global wealth management’s NNFGA — reflecting that APAC still plays a key role in our global business and that clients have confidence in our CIO’s ability to help steer them through the market uncertainty.

To navigate that uncertainty, we have given alternative investments more focus. Because of the lower correlations compared to traditional assets., alternative investments offer clients greater diversification and resilience.

We haven’t stopped innovating in APAC. In 2022, we launched UBS Circle One and WE.UBS to offer clients a top quality experience. Together with our other digital platforms, UBS Circle One and WE.UBS have provided us with stability in delivering content to clients that is personalised, relevant, on-time and seamless.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how will private banks best combine technology with a high-touch, face-to-face service, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

Digital is innate and automatic in the business at UBS. The hybrid model of high-tech high-touch is one that is familiar to us, since this is the way we have always engaged our clients, even before the pandemic.

We keep enhancing our platforms and being innovative to make sure that they are convenient and seamless for clients and at the same time, for client advisors. A strong example is our latest innovation of UBS Circle One, which was first rolled out in Asia in 2022. This mobile app brings the best of UBS’ global ecosystem to clients by connecting them to experts, thought leaders and actionable ideas. It brings them our latest UBS CIO House Views made digestible through short videos, podcasts and interactive live webinars on a daily and weekly basis.

In the next phase, clients will be able to connect with each other and with experts across the globe in “circles” of interest groups on topics they are passionate about.

Stefanie Holtze-Jen

chief investment officer for Asia-Pacific, Deutsche Bank International Private Bank

Vincent Chui

head of wealth management, Asia Pacific & chief executive, Morgan Stanley Bank Asia Limited

Arnaud Tellier

APAC CEO, Wealth Management, BNP Paribas

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

This year has indeed been driven by unexpected events, and 2022 has been tough for clients and for the industry as stocks and bonds tumbled in tandem to an extent never seen in decades. However, thanks to our strong organisation and dynamics, cost discipline, prudent control of our risks, a favourable interest rate environment, and of course, the commitment and efforts from our people, we managed to outperform 2021 in many aspects. Amid a difficult investment market, we helped our clients protect their portfolios, manage their risks and identify investment opportunities and the right solutions to meet their wealth needs. In addition, despite the changing sentiment towards ESG, we managed to drive more meaningful conversations with our clients, and maintained our leadership in this increasingly important area through our enhanced SRI and philanthropy services. These all helped us maintain and consolidate a resilient business platform that enables us to grow further in the coming year.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

Global markets have been extremely volatile in 2022. This is largely due to the mentioned macro risks, as well as much tighter financial conditions. The period of easy credit is over in the near to medium term, and the outlook looks much more uncertain than previous years. For 2023, we are looking at four main themes to navigate through what we expect to be a highly volatile year.

The resulting slowdown in economic demand, easing of supply chain pressures and cooling of commodity prices should calm inflation pressures. This in turn should lead to lower long-term bond yields. We believe that long-term investors should look beyond the peak in inflation and policy rates to the investment opportunities that lower inflation and long-term rates can offer.

The transition from TINA – “There Is No Alternative” (to equities) – to TARA – “There Are Reasonable Alternatives” – has been painful for bondholders, but necessary. The recent dramatic surge in bond yields and the widening of credit spreads have finally created some opportunities in the US Treasury and investment grade fixed income space for investors with a lower appetite for risk.

This environment is creating enhanced opportunities to utilise structured solutions across asset classes in bonds, FX, equities and commodities. In addition, it provides unique opportunities in global macro and trend-following strategies, gold, as well as higher quality companies with secure and growing dividends.

Since 2021, there has been a 180-degree turn. The COVID-19 pandemic, the ensuing economic stimulus and escalating geopolitical tensions have ushered in a new environment of high inflation, largely on the back of a shortage of cheap energy and other commodities, sharply rising interest rates, and a reversal of globalisation in favour of nearshoring. These shifts are not temporary, but structural in nature. The new economic era requires a completely different investing mind-set. We see investment opportunities in energy production and infrastructure, food and water security, cyber security, reuse/recycling, and in industrial automation.

In 2022, China’s economy has been challenged by ongoing COVID 19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

We are increasingly medium-term positive on the Chinese equities market as we believe most negatives have been priced in and further significant downside may be limited.

Shifts in major policy stances – on COVID-19 and property – are encouraging but early in the process, while progress in vaccination will be crucial for the latest rally to translate into a full recovery. We do not believe there will be a large, one-off ending of COVID-19 containment or complete reopening all at once. A gradual, calibrated re-opening could occur potentially in spring or summer 2023 if the COVID-19 situation improves.

Despite the recent rally, valuations remains very attractive. There could still be near-term volatility, but any of such volatility can be viewed as an opportunity, particularly for policy beneficiaries.

Hong Kong and Singapore, Asia’s two key offshore wealth hubs, have both re-opened following COVID-19 this year, albeit on different timelines. What are the relative attractions of both cities in terms of the regional wealth industry, and has Hong Kong significantly fallen behind Singapore?

Both wealth hubs have their own competitive advantages and are key to the growth of the wealth management industry in Asia.

Southeast Asian wealthy individuals tend to prefer Singapore as their destination. As wealth creation in Asia, particularly China, continues to grow, Singapore has emerged as an option for Greater China clients, particularly family offices, to support their increasingly sophisticated wealth needs. They are keen to diversify coverage out of Singapore for more investment opportunities, and wealth services and solutions.

Hong Kong continues to play an important role as a gateway to mainland China’s wealth, particularly with its proximity to the Greater Bay Area. With China further opening up its financial market, and a strong pipeline of cross border initiatives between mainland and Hong Kong, such as Wealth Management Connect, I believe it will only further reinforce Hong Kong’s status as a wealth centre.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

We have indeed witnessed a slowdown in sustainable fund net inflows over the past two years, which was mainly due to macroeconomic headwinds, such as inflation, rising interest rates and market volatility.

That said, ESG fund inflows and new fund launches remained more resilient than the wider market. According to Morningstar, global sustainable funds attracted US$22.5bn of net new money in 3Q2022. In comparison, the overall global fund universe suffered outflows of USS$198bn in the same period.

We do not see significant outflows from our SRI thematic funds, as clients believe in the long term secular story. Our sustainable food fund has held up well, as it is leveraged to the theme of food security.
We also continue to see growing interest in the Positive Impact theme. One of the private equity funds that we are currently marketing has attracted good inflows.

Sustainability is a secular trend that will, at times, be impacted by volatility and market pull-backs, but the direction of travel for ESG remains very clear. We are witnessing a paradigm shift: sustainability is clearly here for good and here to stay.

The industry as a whole should also ramp up their efforts in educating clients and employees. It is important to understand that integrating ESG into a portfolio goes far beyond risk mitigation and value preservation, ESG is also very much about value creation.

At BNP Paribas, we are committed to helping our clients’ understanding the benefits of SRI. Not only have we integrated ESG analysis across our product and services platform — with a clear methodology — to help clients understand the level of ESG integration in each instrument or portfolio, we have been organising different types of workshops and teach-in sessions to help our clients and employees understand how they can play their part to make a positive impact.

Steven Lo

head of Asia Pacific, Citi Private Bank

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

We have stayed close to our clients and helped them find investment opportunities closer to home. We have also leveraged our extensive global network of clients and relationships to deliver investment opportunities to our local and global clients. In particular, we were able to raise interest in private equity products by tapping into our global network.

Despite the border control measures in China, our staff made the effort to travel and undergo quarantine, to meet clients who were unable to travel. For our next generation clients, we ran virtual training sessions on the basics of investing while they were in lockdown. Our client acquisition numbers also saw an uptick on the back of consolidation efforts of other banks. Most importantly, we have learned from previous financial downturns on how to better manage our clients’ risk positions.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

We expect inflation, interest rates and the US dollar to fall in 2023 after surging in 2022. Against this backdrop, investment grade bonds could offer significant returns and potential capital gains when interest rates fall. China has finally begun to relax its COVID-19 control measures and has articulated its intention to revive its economy. This is likely to produce substantial positive returns in the coming year, as earnings and valuations rebound. Alternative investments are likely to remain an attractive option given the large numbers of distressed opportunities and cheap valuations for long-term growth opportunities. More broadly, we remain cautious on US equities, until the US cyclical downturn materialises, and the Federal Reserve eventually cuts rates.

In 2022, China’s economy has been challenged by ongoing COVID 19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

We have spent a fair amount of time helping our clients manage their China portfolios from a leverage and allocation perspective this year. We advised our clients to maintain the right amount of long-term allocation in China investments rather than panic sell their holdings. We remain bullish on the long-term growth prospects of China and want to position our clients to benefit from the eventual re-opening of the world’s second largest economy. Looking at 2023, we are confident that a complete China reopening is near, and further policy stimulus is expected to bolster economic growth.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how do private banks best combine technology with a high-touch, face-to-face service going forward, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

There is no doubt that clients prefer face-to-face interactions on high value transactions and complex financial needs. However, clients are increasingly looking for added convenience and this is where technology comes into play. As a result of the creation of Citi Global Wealth, we are leveraging the areas of excellence that exists in our consumer platform when it comes to digital capabilities. We are working on creating a mobile app that will host everything in one place – a portal which will allow seamless interaction to trade, access thought leadership in various formats, communicate with respective RMs, among other features. This will enhance the client experience along the wealth continuum and also offer clients the right combination of high-touch and high-tech.

Hong Kong and Singapore, Asia’s two key offshore wealth hubs, have both re-opened following COVID-19 this year, albeit on different timelines. What are the relative attractions of both cities in terms of the regional wealth industry, and has Hong Kong significantly fallen behind Singapore?

Hong Kong and Singapore are both key regional and global hubs for Citi, across our wealth and institutional businesses. They are two out of Citi’s four global wealth hubs. We hired several hundred people to support our wealth businesses in both Singapore and Hong Kong last year. They are both key to our strategy and we remain committed to both Hong Kong and Singapore. From our clients’ point of view, both centres are equally important. Clients make decisions based on a number of factors. For instance, proximity to their home base, access to key capital markets hubs, diversification, among others. In many cases, we have seen that they want a foothold in both markets, each for the different access they provide.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

Similar to traditional investments, sustainable investments are subject to market volatility and macroeconomic headwinds. Having said that, sustainable investments have demonstrated better resilience in this environment. We continue to see new sustainable funds launched globally, with over 480 new sustainable funds in the first half of 2022¹.

The headwinds presented by the constraint in energy supply offers further urgency in energy independence and decarbonisation. The reliance on fossil fuels will continue in the near-term, but with a finite time horizon as investments in fossil fuels increasingly come with outsized risks, including increasing volatility of input costs, intensifying competition from renewables, tightening environmental regulation and geopolitical instability.

Citi Private Bank actively engages its clients on the benefits of sustainable investments through a variety of measures.These include client engagement efforts through curating and organising bespoke events to build awareness and knowledge on sustainable investing. We also leverage our sustainability and cross-functional expertise to offer in-depth research insights and keep clients abreast on latest trends and developments. Meanwhile, we enable clients to access a variety of in-house and third-party sustainable investment opportunities across asset classes, investment approaches, geographical locations and themes. We continue to bring exclusive sustainable investment products to our clients, including Citi’s proprietary indices, a global multi-thematic impact fund to outcome-based financial instrument on wildlife conservation among others. Finally, we help clients establish their sustainability objectives alongside their financial objectives and provide advisory services to deliver portfolios and products customised to our clients’ beliefs and investment goals.

It is estimated that 80% of Asia’s household wealth is kept onshore outside of the key wealth hubs of Hong Kong and Singapore. How do private banks best tap the potential of onshore markets

Although many clients begin their wealth journey by creating wealth onshore, over time their needs grow, bringing them out of their home market. Our clients typically have a global view and want access to our extensive global network as their own businesses have expanded beyond their home border. They want diversification of assets; they want their children to study overseas and conduct business in other markets. These are generally the type of clients we serve within the private bank, where we can add value by leveraging the strength of our international network and global expertise.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

We undertook a substantial amount of hiring across the platform this year and were able to recruit from a wide range of sources, not limiting our focus on competitors. We look for talent that will fit our culture – namely people with a global mindset, who are collaborative, relationship-oriented towards both clients and internal partners – and most importantly, choose to join Citi for a long-term career and not just another job. Our focus next year is to ensure that our new hires are appropriately trained and well-integrated into the way we work.

¹ Morningstar data: Morningstar’s Global Sustainable Fund Flows: Q2 2022

Benjamin Cavalli

head of wealth management Asia Pacific and APAC sustainability leader, Credit Suisse

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

In Asia, recovery remains elusive. Asian equities (excluding Japan) have been under pressure in 2022 as China’s zero COVID-19 policy, slowing global growth and USD strength weighed on regional earnings. We believe 2023 is likely to be another challenging year for the region, as tightening monetary conditions are expected to slow Asian economies, leading to meager earnings growth. Though valuations are at reasonable levels and foreign positioning remains light, the region lacks a catalyst for a strong recovery. We expect the Chinese economy to remain weak, despite easing monetary and fiscal conditions, until there is flexibility on the zero COVID-19 policy. Conversely, South Asian markets should benefit from the post-COVID recovery. However, on a relative basis, they trade at a significant premium, suggesting a large part of the recovery is already priced in. As such, we expect regional equities to perform in line with global peers. Within Asia, we prefer stocks linked to China’s sustainability drive, as the sector enjoys strong state support and is delivering robust earnings growth.

As bond yields reset at higher levels, inflation peaks, and central banks stop hiking, fixed income returns look more attractive. Emerging market hard currency sovereign bonds, US government bonds, investment grade corporate bonds and selective yield curve steepening strategies look particularly interesting.

Contraction of equity markets’ valuation is well advanced, though challenged corporate profitability from the weak economic backdrop and margin pressure should still lead to headwinds and volatility going into 2023. We prefer defensive sectors, regions and strategies with stable earnings, low leverage and pricing power, such as Swiss equities, healthcare and quality stocks. Defensive Supertrends such as the “Silver Economy”, “Infrastructure” and “Climate Change” should also prove less volatile.

The USD should benefit from its interest rate advantage for most of 2023. As a result we expect the USD to stay strong, particularly versus emerging markets currencies such as the RMB.

Hedge funds should deliver above-average returns, and 2023 is also likely to be a good vintage year for private equity. Secondaries and private debt should do well. In real estate, we prefer listed over direct solutions.

As bond yields have reset at higher levels, fixed income as an asset class has gained relative attractiveness compared to equities. Diversification benefits should return as central banks stop hiking rates.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how do private banks best combine technology with a high-touch, face-to-face service going forward, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

One of the underpinning pillars of our strategy is digital transformation. We have made significant progress on our digital transformation priorities. We believe digitalisation has become the new normal for our clients and for us as a bank. We see client experience and data capabilities as two critical drivers of success in the new age.

We have been making significant investments to be able to deliver direct-to-client, actionable and holistic advice, investment ideas, and product content, in a relevant, personalised, and timely manner. Given the ever-growing amount and complexity of content and data, the only way to approach this challenge is with technology.

For example, using advanced data analytics and machine learning models, we can leverage our house view content, research insights, and market events, to deliver personalised and actionable reinvestment ideas, sustainability offerings, take-profit/loss alerts, and portfolio quality reports to our clients. We believe the real opportunity is in being able to offer a flexible hybrid service model, responding to our clients’ needs and preferences.

To connect with our clients anytime and anywhere, we continue to invest in an omni-channel client experience. Credit Suisse Chat and Digital Private Bank (DPB) are our award-winning digital solutions, used by our clients and RMs for secure messaging and collaboration, portfolio and investment insights, research, news, trading, and other self-service capabilities.

Furthermore, we are investing in building connectivity with the wider ecosystem, enabling us to accelerate organic and non-organic opportunities with intermediaries, new onshore markets, new client segments, and develop new monetisation opportunities. We actively participate in the wealth ecosystem through partnerships and collaborations.

We are investing in advanced RegTech capabilities across AML, KYC, customer protection, and regulatory and tax reporting.

One notable example for us is iSAP, a technology platform we designed and built in-house to address the complex set of investment suitability processes across the client lifecycle – from investment profile, through to product due diligence, suitability and cross-border rules, pricing, as well as the automation of personalised, pre-trade risk disclosures. With such technology, we are able to move and adapt faster, with full transparency across the advisory journey. We can now unlock exciting opportunities such as direct-to-client advisory at scale, combining content with advanced analytics and predictive machine learning models to offer personalised insights and actionable advice to clients – while being fully transparent and compliant.

We believe certain trends will continue. We need to be able to understand and respond to clients’ needs so that we can continue serving them anytime and anywhere. It is imperative that we are able to deliver actionable, timely, personalised content and advice: differentiating thematic investment solutions as well as proactive and predictive trade advice. We must remain compliant and transparent, and yet be able to move fast and adapt in order to cultivate long lasting trust.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

We see an increased pace of change in consumer behaviour, companies’ production processes and actions by governments to slow climate change, and we believe that this transformation will occur over many years, regardless of short-term fluctuations in performances of ESG-focused funds and productions. We are committed to playing our part in achieving a more sustainable global economy by engaging with our clients and sharing our insights on investment opportunities in areas such as the green energy transition, sustainable transport and agriculture and food.

However, there is a divergence in the degree of sustainability knowledge among RMs in the industry, despite the employee training programmes most private banks might already have in place. To ensure that RMs are capable of advising clients and supporting them well on their sustainable investment journey, there is a need to ensure standardisation across the industry. In Singapore, I am leading the Private Banking Industry Group (PBIG) Sustainability Taskforce, which recently established a common benchmark to ensure that RMs would be well equipped with the relevant content to discuss sustainability products more accurately and confidently, and ultimately ensure clients are well advised on sustainability considerations while making their investment decisions.

We are also constantly innovating to provide a broad range of sustainable investing solutions that achieve our clients’ preferences and goals, alongside our own. In addition, we aim to integrate sustainability reporting into our standard investment reporting and increase transparency on our clients’ portfolio sustainability profile, enabling our clients to make better-informed investment decisions and helping them align their investments with their personal values.

Albert Chiu

executive chairman, Asia Pacific, EFG Bank

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

As a leading Swiss private bank with global reach, we have a strong business model which centres around our clients to provide them a personalised banking experience that is specific to their unique needs.

In this unprecedented macro and market environment, it is of highest importance to pilot and guide our valued clients; not only by standing by their side, but also by helping them to generate returns in a highly volatile market.

Against a challenging macro environment, EFG was able to deliver on its 2022 strategic plan. We have shown that our business model can generate sustainable value throughout the economic cycle and it is a testament to our agility and resilience.

Our Client Relations Officers (CROs) are at the centre of our business model. Our CROs are able to build and maintain long-term relationships, gaining trust through tailored solutions and senior expertise.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

Valuations in bonds and equities are now much more attractive than they were at the beginning of the year and so forward-looking aggregate returns are more attractive. On a longer-term view, the major asset classes are expected to provide acceptable returns.

Often in the rebound, returns are concentrated in a relatively short period of time. For example, the first 50% of the rebound in markets might occur over the first few weeks of a new uptrend. This is very hard to time.

Central banks are key and the rate hiking cycles are now close to an end. The conversation is now about where rates will peak and at what point the Federal Reserve, for example, will go on hold. Attention will then move to when the Federal Reserve will cut, particularly if growth and inflation surprise on the downside.

The inflation outlook is therefore very important. There are a number of factors that should conspire to push inflation lower next year. Firstly, energy prices have stabilised and in some instances have declined, so YoY changes will become smaller – similarly for commodity prices. Meanwhile, supply chain pressures are easing, the US housing market is weakening, and indicators of activity are rolling over, such as used and new car prices.

If the US experiences a mild recession in 2Q2023 or 3Q2023, then that would typically be a challenging period for equities, although one would expect bonds to rally (given the starting level of yields). Diversification benefits would re-emerge. Defaults will rise, as will the unemployment rate. Once that happens and as soon as there is noise about the Fed cutting interest rates, that would provide strong support for risk assets.

Overall, 2023 will be a year for being tactical and diversified. Timing a recession or the cutting of interest rates is challenging. However, some economies have already started to see significant falls in inflation. The likes of China, Japan and even Europe are at different stages of their economic cycle. This creates opportunities for returns and diversification.

Alternative investments, such as hedge funds and/or private markets, will also help with diversification as there will be ample opportunities for managers to exploit.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how do private banks best combine technology with a high-touch, face-to-face service going forward, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

We have a clear digital roadmap for our new strategic cycle, which will further improve client experience and operational efficiency.

We have made significant investments in our IT infrastructure over recent years, especially in the back-end, which provides us with scale and operational flexibility. We feel very comfortable that we have the right technological foundation to support our growth strategy. We now intend to accelerate digitalisation and automation to support revenue growth through the enhanced digital delivery of products and services. As part of that initiative, we announced a partnership with InvestCloud to enhance our digital offering and the user experience for clients and CROs. As a first step, EFG will introduce a new digital platform, leveraging cutting-edge technology and ensuring greater connectivity between clients and CROs, as well as offering personalised content and investment ideas across devices.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

Our first priority as a private bank is to deliver superior service and advice, as well as high-quality investment, wealth and credit solutions to our clients. We aim to meet the current and future needs and expectations of our clients – including the next generation. At the same time, we are driving change as an asset allocator by directing our clients’ assets towards transformative technologies and companies that support sustainable development and innovation.

We do so by integrating ESG criteria as well as ESG-related risk considerations into our investment process and continuously expanding our responsible investment offering.

Given the ongoing macro headwinds in the market, for product offerings we will enrich the product platform and identify ESG-related investment options that are resilient to economic shocks. We believe that sustainable investing can reduce risk and create better outcomes for all stakeholders.

Hong Kong and Singapore, Asia’s two key offshore wealth hubs, have both re-opened following COVID-19 this year, albeit on different timelines. What are the relative attractions of both cities in terms of the regional wealth industry, and has Hong Kong significantly fallen behind Singapore?

Asia, with its young dynamic and diverse population, is one of the fastest growing wealth creation regions in the world. Asia, which comprises many countries and geographies, is very complex and diverse – and Singapore and Hong Kong cater to this diversity.

The Hong Kong booking centre caters predominantly to the vast amount of wealth in the North Asian/Greater China region, including the Philippines.

The Singapore booking centre caters towards the Southeast Asian countries, such as Thailand, Malaysia and Indonesia.

Having two distinct booking centres allows us a larger catchment to benefit from the region’s wealth.

EFG Bank has an established presence in Hong Kong and Singapore, focusing on the offshore business for the China market. We are building our brand in the domestic market through our representative office in Shanghai.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

Our strategy in Asia builds on three growth levels. Firstly, strategic CRO hiring in attractive markets and client segments. Secondly, organic growth of our existing business in Hong Kong and Singapore through a refined credit offering, and increased penetration of higher margin and income generating products, and the rollout of digital trade execution platform for clients and independent asset managers. Finally, the full realisation of synergies between Asia and Australia’s Shaw and Partners.

There is always fierce competition for good talent in the market and we are always looking for the right fit to fill roles in different departments.

Siew Meng Tan

regional head of HSBC Global Private Banking, Asia Pacific

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

Our business performance has demonstrated remarkable resilience despite market headwinds in 2022. Across the region, we have made good strategic progress on multiple fronts, from continued inflows, significant investment in digital and people, to expansion of regional reach and strengthened CIO capabilities.

As part of the HSBC Group, we are supported by a strong balance sheet, diverse business lines, as well as the ability to leverage our retail, commercial and investment banking business to provide holistic services, all of which form our unique proposition among private banks. This year we continued to deepen our penetration in markets where we are strongly positioned. We have also made forays into new strategic locations to meet the needs of our clients through a combination of global products, thought leadership and local expertise, and in collaboration with our partners.

Apart from our success in deepening wallet share, we have made great strides against all pillars of our global strategy, putting us in a position to achieve further breakthroughs in 2023.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

The headwinds from sticky inflation, higher interest rates and economic slowdown will remain key market drivers in 2023. As we expect macro uncertainty to persist, we advise clients to stay defensive with a strong focus on portfolio diversification across asset classes, geographies and sectors.

Clients should diversify portfolios through high grade bonds and hedge funds, with a core allocation to private assets and real estate. Bonds have sold off more than equities in 2022, making their valuation attractive, whereas hedge funds benefit from high volatility and increasing return dispersion.

Asia continues to stand out as a relative safe haven with resilient domestic fundamentals to weather the recession risks. We believe Asian economies can maintain their relative outperformance against their global peers with silver linings of accelerating economic reopening and more growth supporting policy initiatives.

Our top four trends for 2023 focus on the most important macro and market developments that will impact asset prices. These are: “Remaking Asia’s Future”; “Opportunities Amid High Rates and Slowing Growth”; “Digital Transformation”; and “Investing for a Sustainable Future”.

We are also launching a couple of new high conviction themes. “Asia’s Reopening Winners” seeks to capture opportunities from the widening reopening trends across Asia, where we look for winners in the travel industry, airlines, hospitality, food and beverages, Macau gaming and mass consumption sectors. Another new theme is “ASEAN Tigers”, where we seek growth opportunities in consumption companies, infrastructure plays, ASEAN banks and Singapore REITS.

Geographically, the relative resilience of the US leads us to prefer US equities over eurozone and UK stocks. We advise clients to invest in quality US companies under the theme of “American Resilience”.

For clients who look for structural growth opportunities in Asia, our theme of “Asia’s Green Transformation” identifies opportunities from the energy transition, green infrastructure investment and innovation of electric vehicles related technologies.

On fixed income, we continue to like the theme of “Asian Quality Credit”, especially after substantial yield pick-up across the Asian credit markets in 2022. This theme stays focused on high quality corporate bonds in Asia.

In 2022, China’s economy has been challenged by ongoing COVID 19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

In December 2022, we upgraded Chinese equities to overweight from neutral. That followed China’s policy pivot towards gradual normalisation of COVID-19 containment policies and more comprehensive property easing measures. Even after the recent rebound, we think Chinese equity valuations remain attractive. Better economic momentum, earnings and fund flows could support further re-rating of the China equity market.

We are selective on fund solutions positioned in the China equity and bond markets, with active management by our portfolio managers to help clients manage volatility and investment risks

We advise our clients to follow markets closely. Also, our investment experts provide proactive advice to our clients to pick fundamentally attractive and undervalued Chinese stocks and bonds, to capture opportunities and mitigate risks.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how do private banks best combine technology with a high-touch, face-to-face service going forward, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

The ways in which we interact with clients are constantly evolving to provide a more convenient and seamless experience, with a wider range of journeys and products. While technology is an enabler for more efficient and personalised interactions, private banking remains predominately a high-touch business. We need an ideal balance and blend of human expertise and connectivity, aligned with digital excellence.

The hybrid service approach has proved to be especially effective during the pandemic and addresses a broader shift in how clients want to interact with their private bankers.

The recently launched HSBC Prism Advisory, our contractual, portfolio-based advisory and investment service, is a great example of a hybrid model, where we are pairing cutting-edge technology and the expertise of our people, to deliver our CIO-led investment content and portfolio advice.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

We believe the performance challenges faced by many ESG-focused funds and products in 2022, are more related to the cyclical headwinds from decades-high inflation and higher interest rates that hit long duration stocks, including many tech-related ESG products linked with green solutions. These headwinds should ease in 2023 as the US rates cycle is forecasted to peak in the first quarter of next year.

Clients are advised to take a long-term investment horizon in building their portfolio positions in sustainable investments, according to their medium-term climate and sustainability goals and risk appetite.

Despite the market challenge this year, we continue to see an encouraging uptrend in the penetration rate of ESG investments in our Asia client book. Sustainable investments are increasingly being sought after by our clients who see the benefits of the disciplined investment approach driven by the environmental, social and governance factors, as it helps them to mitigate climate and environmental risks in their portfolios while generating sustainable returns over the long term.

It is estimated that 80% of Asia’s household wealth is kept onshore outside of the key wealth hubs of Hong Kong and Singapore. How do private banks best tap the potential of onshore markets?

HSBC has been in Asia for 157 years as a trusted partner for our clients and their families. Not only do we have strong internal collaboration, we are also able to leverage on the relationships and our reputation built over the years in each of the key markets in Asia.

As our clients’ investment goals and needs become more complex and international, HSBC brings our investment expertise, global network and deep local insights to deliver compelling propositions to help them pursue their diverse personal, family and business interests.

Proximity to our clients is essential and we are investing to expand our onshore presence in Asia. In 2022, we expanded our onshore presence in mainland China, adding a key strategic market to our existing onshore footprint in Hong Kong, Singapore, Taiwan, Thailand and the Philippines.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

A strong employee base is the cornerstone of any good business. In 2023, we will continue to execute on our strategy to become a world leading private bank for Asian, international and HSBC-connected clients. In order to do so, we need to sustain a culture of diversity and collaboration that reflects the multi-cultural spirit of Asia and the clients we are serving.

In an increasingly competitive hiring environment, we focus on what makes HSBC a unique place to work and a fantastic long-term career opportunity both locally and globally. We invest heavily into attracting, developing and retaining the best talent. We are also able to draw on our deep pool of experienced bankers across the group, including helping promising bankers who are shifting their career focus to wealth management.

Let us not forget about the next generation of private bankers. We have a long track record of hiring and developing high potential early careers talent through our Global Graduate Programme, which is in operation in four Asian markets, including Hong Kong, Singapore, Taiwan and mainland China.

Raymond Ang

Private and Affluent Banking, Standard Chartered Bank

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

2022 has indeed been challenging for investors and, by extension, private banks. While nobody expected either the scale of market volatility, or the broad-based nature of the sell-off, we had adopted a two-pronged approach in terms of building a more sustainable business that is less sensitive to the vagaries of market performance.

First, we focused more on driving what we call base income, which increases the focus on managed investments — both the funds business and discretionary portfolio management services. This relies less on transaction volumes and builds long-term annuity income. By being more diversified, these solutions can help investors manage the market volatility better.

The second prong is the increased focus on private market solutions, especially in the credit and real estate areas. In our CIO Office’s 2022 Outlook, we emphasised the importance of private markets from both strategic, as well as tactical, asset allocation perspectives. There were three key drivers to this view. First, in a world where yield was then still an extremely scarce commodity, private markets could enhance portfolio yields and overall performance. Second, on a stand-alone basis, the volatility of private assets has historically been lower than for public markets. Finally, we argued that private markets offered greater diversification benefits to public markets, something that was certainly the case in 2022.

A final area of focus has been an increased focus on FX opportunities, which increased as the USD broke higher. This has helped mitigate revenue declines from elsewhere in the business, especially in the equity-related structured notes business.

This approach has served us well in 2022 where we saw record levels of net new money flows.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

Our theme as we enter 2023 is ‘Playing it SAFE’.

We expect the economic growth backdrop to remain challenging in 2023. What has been one of the fastest Fed rate hiking cycles on record makes a US economic recession very likely in 2023. Slower growth should help inflation cool significantly, but not all the way back to 2%. We expect growth in China to be the exception as a gradual removal of mobility restrictions and a policy focus on growth stabilisation causes us to have a more positive outlook.
This backdrop is useful for investors because the historical behaviour of major asset classes through a recession can offer a guide to asset class performance. On average, high-quality bonds bottom first, usually not far from the last Fed rate hike of a cycle. Equities usually bottom later – but typically well before an economic recession ends – once a rate cutting cycle improves the growth outlook.

Against this backdrop, we see a SAFE strategy as the more attractive way for investors to navigate Foundation allocations in 2023:

• Secure your yield via multi-asset income strategies and high-quality bonds
• Allocate to long-term value in Asia ex-Japan equities and Asia USD bonds
• Fortify against further surprises by maintaining an allocation to government bonds, gold and cash
• Expand beyond the traditional by continuing to build an allocation to alternative strategies and private assets.

In 2022, China’s economy has been challenged by ongoing COVID-19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

China equities and fixed income investments have experienced a notable sell-off in 2022, reflective of the weak economic growth against the backdrop of continued mobility restrictions and the clampdown on real estate and new economy sectors.

We have been advising clients to stay diversified and focus on quality income throughout 2022, via a wide spectrum of geographies and asset classes to diversify away from idiosyncratic risks.

Specifically, within equities, we have been advising investors to focus on the energy sector globally for most of 2022, which benefited from strong oil prices. In China, energy stocks have been relatively insulated from factors such as the regulatory probe that has been hurting the internet sector. Globally, we have a strong preference for high-dividend equities, because we believe they offer better defensive characteristics against a volatile environment.

We have also been guiding our clients on what they should do with stocks that they receive from structured notes, and offer them repair solutions to handle such stocks.

As we approach 2023 and see pockets of rebound — in view of the recent rounds of policy announcements to revitalise the economy and support the property market — we expect the outlook in the new year to be more constructive, especially when adding in the depressed valuations on offer. Taking into consideration the latest developments, we have turned incrementally positive on the communication services sector, which includes some well-held single stocks in media and gaming.

Investors in Chinese USD bonds have been challenged for most of 2022 by Fed rate hikes and surging bond default or restructuring cases in China, amid significant property sector headwinds. The elevated idiosyncratic risk has put our credit selection focus back on quality issuers with strong fundamentals and established track records of funding access. In addition, we have suggested the importance of diversification into developed markets, where yields have surged to multi-year highs earlier in 2022 — when compared with an era of near-zero yield not too long ago.

We believe income assets will still offer attractive yield, and our preference would be the investment-grade bonds in Asia.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how will private banks best combine technology with a high-touch, face-to-face service, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

One of the largest shifts in consumer behaviour has been the increase in trust of technology, particularly mobile/web adoption. The last two years have seen massive rates of technology adoption, with even the reticent crossing the digital ‘hurdle’ and becoming fully comfortable with technology.

For private banks, this brings unique challenges. Private banking has traditionally been a high-touch industry, with in-person interactions between RMs and clients. However, this is changing in multiple ways, in particular the client journey. Private bank clients are demanding DIY services. Standard Chartered has responded by enabling platforms for DIY transactions so that clients can operate at their convenience and have easy access to more services. This includes putting in place virtual technologies that allow client-RM interactions regardless of their physical locations. While enabling clients with greater accessibility to more DIY tools, we are correspondingly equipping our RMs to be even more responsive, with a one-stop portal that offers a 360-degree view of their clients’ portfolio.

In 2022, we maintained our focus on investments in digitalisation and technology to support RMs in engaging clients in a hybrid fashion. Some of the tools launched in 2022 include: wealth portfolio performance reports which can be generated on demand by RMs (in Singapore and Hong Kong); and automated pre-trade suitability checks with straight-through order placement capabilities for funds, bonds and equities on the same platform (Triple A Plus).

In 2023, we will build on this investment momentum in digital capabilities to enhance the client experience.

Hong Kong and Singapore, Asia’s two key offshore wealth hubs, have both re-opened following COVID-19 this year, albeit on different timelines. What are the relative attractions of both cities in terms of the regional wealth industry, and has Hong Kong significantly fallen behind Singapore?

Both financial hubs are essential for Asia as they offer different value propositions.

To address their holistic needs, it is important that clients allocate their assets according to each location’s competitive advantage. We have booking centres and deep local market expertise in both financial hubs to meet the different business and personal needs of clients.

The Singapore government has been strengthening its status as a financial hub as more affluent investors have been setting up base here. There are various programmes to attract investors to use Singapore as a base to manage their wealth, such as the Global Investor Programme and Family Office 13O & 13U schemes. These initiatives have been highly successful. As at end 2021, 700 family offices had been established in Singapore (Source: EDB Singapore).

In 2022, we saw a slightly higher trend of Greater China clients choosing Singapore as a preferred booking centre, on account of its neutral and safe-haven location. Due to rising political tensions, more Greater China clients have begun to diversify their assets across multiple jurisdictions / sovereignties. However, Hong Kong’s proximity to China secures its unique position for clients who want access to deep capital markets and opportunities from the Greater Bay Area. To woo more family offices to establish a presence in the city, the Hong Kong government has plans to introduce a profit-tax exemption scheme for investment holding vehicles managed by single family offices in Hong Kong.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

While ESG-focused funds and products are affected by challenging markets similar to all other products, they enjoyed a fair performance in 2022. We saw positive inflows into ESG funds on our platform, amidst outflows in the broader funds universe. We launched a successful ESG structured note linked to USD SOFR (Secured Overnight Financing Rate) which brought in over US$370 million from affluent and HNW clients.

Our latest thought leadership study on sustainable investing shows that clients remain interested in increasing their allocations to ESG related investments. There are however barriers to entry and the industry has been focusing on addressing these challenges. These include issues pertaining to complexity of jargon, a lack of standardisation of ESG data and perceptions around lower performance and higher risks. As we make progress in removing some of these barriers, we believe more investor interest can be unlocked.

It is equally essential to keep on engaging with clients and educate them on the topic. It has been encouraging that many clients view ESG as a long-term trend and feel the need to incorporate ESG into their investment portfolio.

It is estimated that 80% of Asia’s household wealth is kept onshore outside of the key wealth hubs of Hong Kong and Singapore. How do private banks best tap the potential of onshore markets?

Our focus in Asia has been on UHNW clients. These are mostly entrepreneurs who have created considerable wealth by capitalising on the opportunities from the rapidly growing economies in the region.

Over time, the extent of their fortune makes their wealth management needs more sophisticated and institutional in nature, shifting from a domestic to an international focus. UHNW clients demand greater depth and breadth of the solutions on offer, and expect a banking partner to offer them access to traditional products (such as structured products/FX, alternatives investments) as well as ESG-driven offerings, and a flexible credit offering.

What differentiates Standard Chartered from most other private banks is that, as a universal bank, we serve this group of clients by bringing our “One bank” offering — from corporate banking, financial markets to private banking. In addition, our heritage in Asia with deep local knowledge and a strong franchise, coupled with an international connectivity across Asia, Africa and the Middle East offer an unparalleled advantage in Asia and beyond.

Over the years, we have built trusted relationships with both the entrepreneurs and their families, and our ability to offer wealth planning solutions and succession planning advice can ink our partnership with clients across generations.

Kam Shing Kwang

chief executive officer, J.P. Morgan Private Bank Asia

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

J.P Morgan has been helping UHNW clients around the world to manage their
wealth for more than 200 years. First-class, personalised services have always been central to our client engagement, and to helping them achieve their unique ambitions and goals.
We have navigated these recent headwinds by continuously looking out for clients and their best interests, constantly reviewing how to sustain their wealth and protect their legacy on a multi-generational basis. We’ve helped our clients weather the storm in 2022 by assessing where deleveraging is needed. This usually means some downside in the short-term, but we are focused on doing the right things at the right time for our clients over the long-term. We have always provided first-class business the first-class way and we’ve performed well through the end of the year as a result.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

For clients who want stable income but are risk-averse, we continue to like fixed income,
particularly investment grade and US Treasuries. Beyond fixed income, we are focused on
helping clients prepare their portfolios for both the short-term and long-term. In the short-term, given the backdrop of a complicated global macro environment, we are also looking at opportunistic funds in the alternatives space that can take advantage of market dislocations and liquidity constraints; within equities we continue to like healthcare given its defensive tilt as well as structures that can hedge against downside risk while providing yield; and lastly we think macro investing will remain interesting and continue to provide opportunities in FX and rates.

We are also advising our clients to think about the long-term with a focus on portfolio
construction and preparing for a new type of economic cycle. From this point of view, a
a dramatic reset in valuations has created attractive entry points for both stocks and bonds. For investors overweight cash and with a longer investing time horizon, it could be an opportune time to prudently phase in.

In 2022, China’s economy has been challenged by ongoing COVID-19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

With the positive policy developments around re-opening, the light at the end of the tunnel is
more visible and China equity markets have turned from a bear market into a trading market,
and with an upside bias in our opinion. Following the rapid pace of policy developments and
market moves we are focusing our attention to select areas where we still see some potential upside, structured products that can take advantage of volatility, and tactical moves to position in pullbacks.

There are three stages to a full re-opening: stage one is domestic re-opening; stage two is re-opening to Hong Kong and Macau; and stage three is re-opening to the world. As the stage one domestic re-opening has largely played out, we recommend positioning for the second and third stage of reopening.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how do private banks best combine technology with a high-touch, face-to-face service going forward, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

Throughout our history, we have offered clients the highest levels of personalised services. We do this today with the speed, scale, and convenience of our integrated digital platform. Our clients have direct access to our latest market insights and strategy recommendations, full visibility on their investment positions and portfolio performance, and ability to execute trades whenever they want.

In 2023, we are making further enhancements through our focus on partnering with fintechs to co-develop innovative new digital services, data driven analytics and insights, as well as digital capabilities to help provide greater convenience and optionality for our clients.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels. How do private banks continue to generate interest in ESG-related investments against this backdrop?

While ESG investment performances have been underwhelming and questions have emerged about the pace of ESG adoption, fund flows demonstrate that there continues to be
fundamental investor interest in this important space. This year we saw the MSCI World Climate Paris Aligned Index underperform the broad index due to the surge in traditional fossil fuels. Despite this, during the first three quarters of the year ESG funds received USD140bn in inflows versus other more traditional asset classes that experienced outflows.

Education will continue to be key to help clients look beyond shorter-term noise and volatility
and identify areas that will attract substantial capital on a long-term basis as well as help with
overall portfolio diversification. As wind and solar power costs have dramatically declined over the last decade, investments will continue to be made into climate solutions.

High-interest areas continue to emerge for investors, such as nature-based solutions to reduce carbon emissions through forestry and better agricultural systems.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

We will continue to ramp up headcount to support our growing client base in Asia. We take a
differentiated approach to recruitment. We are not just hiring a lot of people to reach a target
of say being the biggest, we want to be the best – so hiring the right people is important for us.

If size follows, that’s a by-product, not the goal. The best means that we are the first ones that clients reach out to, where we are their go-to bankers and advisers. We are still on track with our plans to double in the next 5 years and I would attribute it to three areas: one, is how we look outside of the industry for non-lateral hires, such as from the legal, real estate and journalism field, as well as graduates from universities and business schools; two, our integrated team model where our approach to serving clients with the number of clients per client advisor maintained consistently at a ratio of 12-to-1, with each client advisor specialised in their own expert fields; and lastly, the bank’s approach to hiring and training
private bankers is tried-and-tested. Reviewing the performance of the non-lateral hires, we can see that they do just as well compared with talent hired from other private banks.

Jean Chia

CIO, Bank of Singapore

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

The investment landscape in 2023 will remain highly complex, as rapid rate hikes from 2022, elevated levels of inflation, volatility in the energy markets as a result of the war in Ukraine, and the last vestiges of the pandemic are set to cause global growth to fall to recessionary levels.

We see 2023 as a year of two halves for risk assets: equities and credit are expected to experience a volatile bottoming process in the first half of 2023, before staging a gradual and sustainable recovery in the second half of 2023.

In the face of anticipated peak Federal Reserve hawkishness and macro pressures, we favour high-quality, long-duration, developed market investment grade bonds as safe haven hedges against recession. Within equities, we believe portfolios should incorporate companies with a quality tilt as well as dividend growers with a demonstrable track record of paying increasing distributions over time. In this environment, we believe the dollar will likely see a more pronounced downturn by the middle of 2023, while gold is poised to gain its lustre again.

Investors have become increasingly aware of the limits to diversification in a traditional 60/40 equities/bonds setup, given their positive correlation during the recent market drawdowns. This new regime of positive real interest rates, persistent inflation and elevated market volatilities has sparked thoughtful discussions throughout the investment community about the future of portfolio construction. We believe that increased allocation to alternative investments can help portfolios generate significant risk-adjusted outperformance over longer time periods.

We expect the Russia-Ukraine war and US-China superpower rivalry to spill over into 2023. Heightened geopolitical tensions across various theatres of conflict could keep prices of key inputs volatile, such as energy and fertilisers. Tech companies with large cross-border revenues or Chinese companies reliant on US know-how could also face significant risks. These developments would imply that the ongoing trend towards localisation, de-linking of supply chains and de-globalisation is likely to continue unabated.

Food insecurity has become front and centre following the war in Ukraine. We believe countries will accelerate decarbonisation efforts in 2023, not just to combat global warming, but also to reduce reliance on fossil fuel from Russia. We prefer companies that:

• Develop climate-resilient infrastructure and buildings;
• Improve water and food security; and
• Devise energy-efficient, low-emissions technology.

Specifically on positioning within Asia Pacific, we believe long duration investment grade bonds issued by companies in India are relatively better positioned to weather the cyclical downturn given their stronger credit profile.

In high yield, we prefer defensive Indonesian plays with lower foreign currency exposure, and renewable energy names in India.

Across Asian equities, we are constructive on mainland China, Hong Kong, Taiwan and Singapore. This is on the back of a mix of reopening tailwinds, undemanding valuations, and positioning ahead of a potential inflection in the semiconductor industry.

In 2022, China’s economy has been challenged by ongoing COVID-19 restrictions and a weaker real estate market. How are you helping your clients to mitigate the investment risks in the world’s second largest economy?

Our starting point is that gradual reopening is paving the way for the removal of a key overhang for Chinese risk assets. Policies are moving in this direction, such as plans to boost elderly vaccination rates, as well as the recent announcement of the “20 measures”, a roadmap for China to exit zero-COVID.

Our base case is that policymakers will step up preparations for an effective exit from zero-COVID and reopen by mid-2023. This underpins our forecast that China’s growth will rise to 4.5% versus 3.0% in 2022, and that we have likely passed the point of peak mobility curbs and are nearing the peak of zero-COVID related economic disruptions.

We could potentially see three additional positive drivers:

1. The support and policy loosening for the property sector since mid-November will alleviate a major drag on the economy. The 16 measures released jointly by the People’s Bank of China and China Banking and Insurance Regulatory Committee on 14 November represented a substantial shift and the strongest show of support for the real estate market to-date.
2. The regulatory scrutiny of technology companies could shift to a lower gear. In a meeting in late July, the Politburo called for an end to the “campaign style” regulatory crackdown on internet platforms, and to replace it with “regular supervision”. This message was recently reinforced in a report submitted to the People’s Congress in late October by the head of the National Development and Reform Commission (NDRC), the central planning agency.
3. The efforts taken by President Xi Jinping during the recent G20 and Asia-Pacific Economic Cooperation (APEC) meetings to de-escalate geopolitical tensions with the US, Japan, Korea and Australia are positive developments that could lead to some degree of easing of geopolitical risks.

For investors with long-term horizons, we believe that distressed valuations in Hong Kong and mainland China equities offer positive risk-reward. After a devastating decline in key indices over the last two years marked by a series of negative catalysts – from the clampdown on technology companies to the property sector bust, to an escalation of the US-China conflict – we believe that significant negativity is already priced in for Hong Kong and mainland Chinese equities. We prefer selected consumer plays and internet/platform names that can ride on the back of China’s bumpy but eventual reopening.

In fixed income, we prefer investment grade, top tier, systemically important state-owned enterprises (SOEs) . Within high yield, we still maintain a defensive stance in China property and continue to advocate a switch into quality.

ESG and sustainability are generally higher up the agenda than ever for private clients in the region. However, many ESG-focused funds and products have struggled this year amid market volatility and a surge in prices for traditional fossil fuels.

Bank of Singapore wasted no time in 2022 in intensifying our sustainable investment approach because of our conviction that sustainability will be the driver of long-term returns and climate risks remain front and centre for investors. Over the past year, we have incorporated environmental considerations within our investment process – from research to portfolio management. As part of our endeavour to align our process with regulatory expectations and requirements, we now integrate environmental risk considerations into our investment process, including governance, research, portfolio construction and risk management aspects.

We supplement our green solutions with in-house frameworks to provide guidance as to the ESG intention and depth of ESG incorporation within the professed investment approach, using a ‘Emerald, Sage, Garden’ green framework and, taking into consideration a combination of ESG ratings and various qualitative factors.

Alok Saigal

president and head, Nuvama Private

The last 12 months have undeniably been volatile for private banks. How have you navigated these headwinds in order to protect AUM and revenue, attract net new assets and maintain the client base?

We believe that a portfolio approach is key to tiding over volatile times. We have always followed an approach of prudent asset allocation and the last 12 months have seen more active calls being taken across our clients’ portfolios, which has enabled us to beat the benchmark returns.

Additionally, market-neutral alternative strategies such as our distressed asset funds and infrastructure yield funds have helped immunise our clients’ portfolios. In the fixed income space, we are locking-in higher yields for our clients through Indian rupee market-linked debentures and dollar bond funds.
Our advisors continue to focus on client coverage activity in a focussed manner, working closely with industry bodies to solve specific needs and pain points of their members.

Global markets this year have been rocked by decades-high inflation, rising interest rates and a plethora of geopolitical challenges ranging from Russia’s invasion of Ukraine to fresh tensions between Washington and Beijing. What will be the key investment themes for the market in 2023? How are you advising clients to invest in the region of Asia Pacific?

1Q2023 should ideally be the end of the rate hike cycle by most major economies, if no further shocks either geopolitical or otherwise play out. By the end of the next year, we can even see some central banks turning accommodative.

During 1Q2023 and 2Q2023, elevated yields may potentially be the highest this decade and could be used opportunistically to lock-in high annuity and add some duration in our client portfolios.

India, we believe, is poised to continue to outperform global markets on the back of strong corporate earnings. Next year could present a lucrative opportunity for our clients to start accumulating equity from a three-to-five-year perspective. The Indian economy is set to reach US$4tn over the next three-to-four years, opening up investment avenues in alternatives via private markets for UHNIs. We see a strong pipeline of opportunity in unlisted equity, infrastructure investment trusts and REITs. Our clients have business interests across multiple geographies and we are advising them to diversify their wealth by building offshore portfolios using feeder funds and the Liberalised Remittance Scheme routes.

COVID-19 was an accelerant in terms of investments in digitalisation in the private banking industry. But with the pandemic finally receding in Asia-Pacific, how do private banks best combine technology with a high-touch, face-to-face service going forward, both in terms of clients and RMs? What will be the focus for tech investments in 2023?

The technology team has focused on building sales and service platforms with an emphasis on the client-first approach. Today, the technology platform comprises multiple applications leveraging best-in-class and cloud-powered solutions like Salesforce, UI Path, and Amazon Web Services, along with a strong impetus on critical developments being managed in-house.

We have managed to completely automate the account opening process, reducing turnaround times more due to efficient backend processes

Our ‘Private Wealth App’ delivers client reports, analytics, ‘do-it-yourself’ client servicing options and RM/CXO connect at the client’s finger tips. The app is available on the Apple and Android platforms and has undergone rigorous security checks. Since the launch of the app, the core team has delivered rapid and steady feature enhancements, which has led to exponential growth in client access.

Salesforce has been leveraged to deliver simplistic yet comprehensive processes for transaction processing, leading to reduced errors, flexibility in managing exceptions, and enhanced compliance. Continuous incorporation of client and user feedback has been pivotal to the adoption of these processes by clients, RMs and employees

New innovations such as blockchain could reduce settlement times, improve efficiencies and have a huge impact on how clients transact. Secondly, the Metaverse and 5G will also drive significant advances, especially as India has among the lowest 5G rates in the world. Metaverse combined with 5G has many use cases – everything from medicine, to automobiles, and so forth. And all of this will help to hyperpersonalise what we will be able to do for clients. This is clearly a megatrend in the making. Finally, the Internet of Things will result in the connectivity of almost every machine and gadget to the internet, which will revolutionise the delivery of advice to wherever your clients are.

Where will your bank focus its hiring efforts in 2023, in terms of front-, middle- and back-office? What are the key attributes you are looking for and how do you plan to find them?

We will focus on hiring only top bankers in the front office. We will look to onboard individuals who are a cultural fit for us – high performers who put the client first, are ambitious and hungry to build their practice and demonstrate humility. Every candidate undergoes rigorous evaluation through multiple interviews, functional assessment, psychometric profiling and industry reference checks. We are extremely
focused on quality over quantity in our team build out.