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Premium Pickers – Private equity goes mainstream with PB clients

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As clients continue their predilection for all things cash in 2023, Indosuez Wealth Management (Indosuez WM) seeks to encourage its clients to diversify, particularly into private equity and hedge funds.

Arjan de Boer, the head of markets, investments and structuring, said there was more optimism during the first quarter as markets were more buoyant. However, with the banking crisis in the US and the collapse of Credit Suisse, that optimism has been challenged.

“Private equity really is becoming mainstream” — de Boer

“So we see our clients having a larger proportion than usual in cash [this year], and that’s also reflected in our AUM […] We also have some clients putting money in money market funds, but most clients choose term deposits because money market funds are near cash anyway,” de Boer told Asian Private Banker. 

No panic buying, no panic selling

Indosuez WM’s current advice to clients is to keep some dry powder and look to other asset classes for better diversification, especially in private equity and hedge funds.

“Private equity really is becoming mainstream,” he said. “There was a massive correction in the market at the beginning of COVID, both equity and fixed income were very difficult. And there you see actually something that is not as liquid was much better able to weather the storm because there’s no panic buying no panic selling, and private equity and long-short funds are uncorrelated.”

The firm currently has several high-quality hedge funds on the shelf. Last year the firm also launched an in-house fund called the Evergreen Private Equity Fund, which is structured in a semi-liquid format and provides quarterly liquidity.

De Boer also believes that its in-house management skills will help the firm to attract more clients to alternatives. “We are the manager, and private equity is something that we started in 2001. Globally, our PE AUM is around CHF 7 billion, and we have over 35 PE specialists around the world, so that’s really in-house. The way we offer this is either through direct or co-investments, and we do that together with big GPs,” he explained, adding that the bank also provides private equity fund of funds and special private equity funds.

“We have put more focus on Evergreen Private Equity Fund. It’s really quite popular with our clients, and the performance has been good. We will also continue to go up with new vintages on the private equity side and look for specific hedge fund products that can differentiate our offering from our competitors,” said de Boer.

“I haven’t seen as much appetite for gold as this year in all the six years that I have been with the bank” — de Boer

Gold sees traction

De Boer also highlighted that gold is seeing traction as the recent geopolitical tension makes it more attractive.

“Gold is something that we have been advocating for years, and I haven’t seen as much appetite for gold as this year in all the six years that I have been with the bank,” he said.

He added that gold is trading around US$2,000 per ounce, and the firm expects there is room to go to US$2,100. “Central banks around the world continue to buy gold, especially China and India, in large quantities. For sure geopolitical tensions play a role, and I also believe that the fact that the Fed seems to be at the end of the hiking cycle is also something that makes buying gold more feasible.”

While Indosuez WM is not foreseeing a rate cut anytime soon, de Boer said that as the market has priced in a rate cut, it will make gold more attractive.

Structured products are back

De Boer said structured products were trading quite heavily during the first quarter, but starting late March activity slowed.

“But what we now see is that it’s easier to make capital-protected structured products, let’s say 12 months or up to three years, and given the higher interest rates, it’s much easier to make these capital-protected structures where a client can have upside from the protected feature against the downside, so we see some appetite back in that as well.”

The bank is also looking to launch a new fixed maturity plan, or FMP, where clients can potentially lock in for a longer period with a higher yield.

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