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Alternatives in Focus – Semi-liquids a “big game changer” for clients

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During Asian Private Banker‘s Alternatives in Focus event held at the Westin Singapore, leading private banks in Asia shared their views on the need for due diligence in portfolio diversification.

Among the topics up for discussion, at the event on 30 March 2023, were the importance of interest alignment and track record in choosing a partner, as well as why semi-liquids might be a game changer for introducing clients to alternative assets.

“The introduction of semi-liquid assets is a big game changer, because now you have entry products for a lot of clients,” — Lansonneur, DBS

Semi-liquids a game changer

While increasing the penetration rate within alternative investing has been a challenging task for many private banks, as most clients in Asia have just started slowly adding allocation last year, DBS has seen meaningful growth in penetration over the years.

Panellists De Boer (L), Goh (M) and Lansonneur (R), at Asian Private Banker’s Alternatives in Focus event, 30 March 2023

“Increasing penetration is a journey,” said Marc Lansonneur, managing director, head of Managed Solutions, DBS Bank. “We started the journey in 2014, and each year, we have been raising more and more AUM. Last year we raised more AUM in alternative than in liquid funds,” he asserted.

Marc Lansonneur, DBS

Lansonneur believes the trend is going to accelerate, not only because penetration is low, but more because clients are becoming more sophisticated.

“The introduction of semi-liquid assets is a big game changer, because now you have entry products for a lot of clients.”

DBS started to introduce semi-liquids to clients last year, and he said the bank has raised more on semi-liquid strategies than any other product last year.

“We had big tickets, US$10 or US$20 million tickets, not only US$50,000. It’s really an entry product, and the industry should have started with these products, because we can bring this to the clients [first], then we can move to longer lock-in period funds. And then after, we can even do bigger deals like pre-IPO.”

Interest Alignment

Hui Yang Goh, head of alternative investments Asia, at Pictet Wealth Management, believes that it is important to find a partner that shares the same interest.

Hui Yang Goh, Pictet

“I also believe this is very important, to look at alignment of interests. You want to be on the same side as the manager.  You don’t want them to take excessive risks, but you want to make sure that they are also looking to help us generate gains and capital appreciation,” Goh asserted.

Pictet is also very selective on partners and deals. Regarding track record, she believes it’s about the team and the people that are managing the capital. Goh added that the bank looks at consistent track record and the ability to help the portfolio companies to navigate through difficult times.

“At Pictet, we like to build relationships early. It takes time to get to know someone, to see how they invest and navigate the environment. Sometimes we do our work, and then we may not be ready, but we continue to track them and monitor the progress. And maybe the next time or perhaps if they need a co-investor in a deal, we’re happy to step in.”

Track record 

Arjan de Boer, Indosuez Wealth Management

Arjan de Boer, head of Markets, Investments and Structuring, Asia, at Indosuez Wealth Management, argued that credibility and track record are crucial when it comes to private equity selection for clients.

De Boer said the bank applies different levels of due diligence depending on the circumstance. For instance, there will be a different due diligence process for fund houses that have a larger size with a very long track record, whereas the bank will dig deeper with its due diligence for a start-up fund house.

“For instance, a few years ago, for the first time, we were marketing some funds from Capital Group, one of the world’s largest asset managers, [and] that due diligence was much easier than the kind of managers that have a very good idea, but are not well-known, and have no proven track record, [so] the process will take much longer,” he explained.

“We are looking at the liquidity of the products, the underlyings, and also the investment horizon. These are some of the items that are really quite important,” he added.

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