The market volatility that has emerged on the back of geopolitical tensions, soaring inflation, and rising interest rates is seeing clients still sitting on more cash, while seeking diversification across different investment styles.
Donald Rice, Julius Baer
Speaking at Asian Private Banker’s 9th Fund Selection Nexus in Singapore, key due diligence heads shed light on how they are helping clients rebalance their portfolios and what that means for product selection.
The majority of Julius Baer’s clients have been cautious, pointed out Donald Rice, head of fund specialists, Asia. But since June many of them have used the recent rebound to rebalance their portfolios.
Getting out of cash
“We have two subsets of clients – one sitting on a lot of cash and another sitting on a lot of growth exposure,” he told delegates. “So, we have been advising them to trim that exposure and put it into something defensive such as high quality dividend funds.”
John Ng, DBS
“When it comes to cash we’re talking about deploying cash. At this stage, maybe it was wise for clients to sit on some degree of cash, but we know that will be detrimental in the medium to long term.”
Similar views were echoed by John Ng, head of funds business at DBS Private Bank. “A lot of people are still reluctant to be aggressive. So we’ve looked at re-adjusting portfolios with more defensive funds, and we are trying to get clients out of cash slowly, by offering cash-like short duration products.”
Jansen Phee, UBS
At UBS Global Wealth Management, Jansen Phee noted that diversification has become key among clients — not just across thematics, but across investment styles such as value and growth.
“We don’t sense the fear in them like what we saw in 2008 or 2009 when there were a lot of margin calls,” the head of funds investment solutions, Asia Pacific and head of global investment management, China, told delegates.
“Clients are just cautiously waiting for the right time to re-enter the markets because a lot of them are sitting on cash.”
Product shelves changes
Considering this backdrop, DBS has added more ESG thematic funds to its product shelf, while UBS padded up on ESG funds as well as a metaverse strategy. Among the funds that Julius Baer has onboarded is a hedge fund that focuses exclusively on the digital asset ecosystem.
“Some new creations have taken place in the area of environmental science and we have looked at a few fund managers because it’s interesting for us in the area of new technology,” Ng shared. DBS is also looking at semi liquid, private equity investments within ESG.
Phee finds no need to add more thematic funds — unless it is a new theme. “But I think there are more opportunities in sustainable investing,” he added, “because clients have not adopted that to the extent that we would like to see. Some form of creativity and innovation can happen in the products space.”
Track records are a corner stone to every due diligence process at Julius Baer, and it rarely deviates from this. However, the Swiss pure play was recently able to obtain limited capacity in a hedge fund that focuses exclusively on the digital asset ecosystem.
“We’ll just forget for the moment about digital currencies….[and focus on] the less sexier part that is developing around digital assets — such as blockchain, infrastructure, custody and fraud protection.
“And the best way to approach this is through a hedge fund with a venture capital piece to it. The new programme originates from an established global macro manager who has 20 years’ relevant expertise,” he explained.
Global vs Asia debate
At DBS, where asset allocation strategies are more global and broad based, clients mostly have a home bias, shared Ng. “We hope that Asia lagging the US will help them to move their mindset a little bit towards a more global holistic asset allocation — rather than just going for the biggest return in China.”
Julius Baer’s clients, on the other hand, are steering away from China exposure, and have taken advice to take a closer look at ASEAN. Rice is particularly keen on exposures to India and Indonesia both through equity and credit, as well as Singapore defensive exposure to financials, REITs and telecom.
“Our clients tended to be more China-biased in the last few years, but they have started to realise that they need to diversify their portfolio,” Phee said. “So they are looking at global equities, more US and even Europe.”
Asian Private Banker would like to thank the following sponsors of Fund Selector Nexus Singapore 2022
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