The market rebound at the start of 2023 has raised hopes among private banks and asset managers that last year’s market rout is well and truly a thing of the past.
Against that positive backdrop, Asian Private Banker‘s sixth APB Intensive saw four leading asset management groups pitch their funds to a select audience of the region’s most important private bank fund selectors. More than 60 fund selection executives from over 30 private bank and wealth management institutions tuned in to watch the quick-fire, eight-minute pitches that were the focus of the virtual event on February 22.
As part of the event, two of Asia-Pacific’s most prominent fund selectors shared the themes that will shape their product shelves in 2023. On Friday, APB will provide detailed coverage of the asset managers’ pitches.
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Three themes for 2023: Christina Au-Yeung of Morgan Stanley Private Wealth Management (PWM) Asia
Christina Au-Yeung, co-head of Investment Management Services for Morgan Stanley PWM Asia, highlighted that China’s reopening, the maturing Fed policy, and private equity dispersions are the bank’s three key themes for 2023.
“Across each of these themes, we use different types of products and fund solutions to play our views in each of these,” Au-Yeung said during the event.
How to play China
Morgan Stanley PWM Asia is looking to play China’s reopening through mutual funds that invest across Hong Kong, China, as well as more broadly in Asia and emerging markets, and believes that the bull market is still relatively young in China.
The US bank is focused on hedge funds that exploit the mid-cycle volatility dispersions of fundamentals, and private equity that can take advantage of markdowns across sectors in China and capital deployed, according to Au-Yeung.
Some of the sectors that Morgan Stanley PWM Asia like within China include healthcare and renewable energy, she said.
“We also want to be conducive to investors in China, who are improving in in terms of confidence as China reopens and are looking to deploy capital where they may not have through 2022. So we’re making sure we have a good offering of QDLP (Qualified Domestic Limited Partnership) products as well as a suite of renminbi products for our clients within domestic China to be able to participate,” she continued.
A year of yield
Morgan Stanley PWM Asia believes that 2023 will be a year of yield, due to slower global growth, inflation, and higher rates, which are all conducive to opportunities within the income space, Au-Yeung added.
“We are focused on funds and strategies that play high-quality income opportunities, as well as a return to Asia credit opportunities.”
Morgan Stanley PWM Asia also sees the credit market is creating opportunities. “In that sense, in terms of strategies and funds, we are also focused in looking at credit relative value, as well as macro and alternative credit.”
In terms of the private market, the US bank is known to be favouring illiquid private equity funds. She said the markdowns across the private equity space, and the slower exit environment overall through last year, has thrown off a lot of opportunity across private equity markets.
“We are particularly excited about some of the segments in opportunistic growth across distressed and special situation, as well as co-investments.” She added that the bank is coming out with a suite of private equity funds which doubles that of previous years.
Private market continues to play out: Donald Rice of Julius Baer
Similar to Morgan Stanley PWM Asia, Swiss pure play Julius Baer is also focusing on private markets as a key theme for 2023.
Donald Rice, head of funds for APAC, told participants of the APB Intensive event that the bank favours multi-manager hedge fund platforms.
“We like the fact that they have a highly institutionalised setup and very sophisticated risk management, in addition to the fact that they are multi-strategy, which have an embedded diversification within that,” Rice explained. He added multi-manager hedge fund platforms are contrary to the rest of the hedge fund industry, with good inflows and are going from strength-to-strength.
He said the bank likes to stay “opportunistic” and focus on a single theme when investing in private markets. Rice added that the bank has planned some buy-out opportunity solutions, but with a turnaround element to it. He believes that there will be a wave of refinancing coming through with those companies, which will bring good opportunities in the turnaround stage.
“We also continue to like secondaries and healthcare,” Rice said, adding that if clients want to be defensive, they should understand that the healthcare sector is typically defensive. They should be able to express that not just on the public side, but also through private equity, Rice explained.
Avoid long-short equity
One area that Julius Baer will avoid is fundamental equity long-short, according to Rice.
“[Fundamental equity long-short] has been the backbone of the industry for decades, but if you think about fundamental equity long-short stocks, it has not been an appropriate environment for them.”
“We do like opportunistic trading,” he said, adding that opportunistic trading is a slightly different take on that, where they are more reacting and trading around earnings dates or trading around, with a more agile element.