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HNWIs keen on onshore/offshore combined strategies in China fixed income: HSBC AM

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Over the last 12 months, HSBC has more than doubled its AUM in Asia fixed income, Soren Beck-Petersen, head of distribution private banks, Asia-Pacific, HSBC Asset Management, told Asian Private Banker.

Chinese bonds have presented attractive valuations that typically come with a higher yield element than their US counterparts, he noted, and yield-hungry HNW investors have been steering into China fixed income, with a preference for strategies that combine onshore and offshore bond holdings.

“We see China as a major opportunity,” he added, “and there is especially demand for strategies that are combining onshore and offshore bond holdings.” Investors appreciate the level of flexibility provided by such combined strategies, he explained, and HSBC AM’s onshore and offshore presence made such strategies available.

He believed the recent spike in defaults among the country’s state-owned enterprises (SOEs) — some of them even labelled as “investment-grade” by rating agencies — does not pose a concern to investors in the longer term, noting that default rates are “overall lower in China than what is seen elsewhere”.

Investment-grade products in China as well as the rest of Asia have received more investor interest in the past year, since “investors do not have to go far into the maturities for gains” compared to similar strategies in the developed markets.

Beck-Petersen told Asian Private Banker here has been a significant focus on higher-yielding strategies, as well as demand for both investment-grade and crossover Asia fixed income strategies — those that invest in pubic and private debt markets in a bid for exceptional returns.

“In rough numbers, we have seen more than a doubling of our AUM in Asia fixed income funds over the last 12 months,” he said.

Closing the gap on sustainable investing
In addition, this yield focus is present in the Asia multi-asset segment as well. Multi-asset is a popular approach for sustainable investing (SI). “We have noticed a demand for alternative investments — and especially for alternative investments in Asia,” he observed. “We have scaled up our infrastructure debt and private equity to meet that growing demand from UHNWs, who are increasingly investing alongside the institutional asset owners.”

Source: HSBC AM • Click on image for PDF file

HSBC Asset Management has published an SI survey, probing the views of 1,000 affluent and HNW investors in Hong Kong, mainland China, Singapore, and UK, as well as 100 advisers in each market. The findings show a significant gap between high SI awareness and a low representation of SI solutions in actual holdings.

More than 80% of the investors believe ESG and sustainability will be central to how they manage their portfolios, yet such solutions make up less than a third of their existing holdings.

“That means there’s a disconnect between investors’ intention and their actions,” said Beck-Petersen. “But I’m convinced that the gap will quickly narrow as investment managers catch up on their ESG offerings.”

HSBC AM has new launches in the pipeline — two fixed income strategies with an ESG element, which allocate to Asia and global markets respectively. It has set up a dedicated team for investments in sustainable healthcare, and a related strategy will be rolled out for clients in the near future.

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