On the back of falling stock prices, widening credit spreads and high long term rates, Asia Pacific high-net-worth investors (HNWIs) are taking a more conservative approach in their portfolio allocations, Lombard Odier 2022 HNWIs Study found.
According to the study conducted by the Swiss private bank and its strategic alliances in the region, HNWIs are repositioning their portfolios over the past two years, diverting from traditional asset classes such as equities and bonds towards investing in their own company (27% increase), “safer” assets such as cash and gold (44% increase) as well as alternative and private equity assets (37% increase).
“Hong Kong and Singapore investors rank above the average, going more into safer assets,” says Lombard Odier head of ultra high net worth individuals offering, Asia Jean-François Aboulker.
This is as market volatility remains one of the main concerns when it comes to investment portfolios, with 50% of the region’s HNWIs worrying about its negative impact on performance. Meanwhile, 26% fear their portfolio diversification might not work when needed.
Private assets are poised to play a more important role going forward, with 37% of the APAC HNWIs planning to increase their position. Singapore and Australia are leading the trend, with 60% of Singapore HNWIs and 57% of Australia HNWIs intending to increase their allocation.
These investors seem to believe that private assets are a way for them to capture structural changes ahead in a regulated and risk-managed way, says Albouker. There is also typically more visibility on the risk in these assets compared to other investments such as cryptocurrencies.
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When it comes to digital assets, 83% of Asia Pacific HNWIs have no crypto investments or less than 5% of their portfolio invested in the asset. While the interest is present, investors remain hesitant — in Singapore, 21% of HNWIs intend to increase their allocation, as aligned with the Asia Pacific average, with 56% currently not holding any digital assets at all.
The study also finds that the overall exposure of Asia Pacific HNWIs to their domestic market has decreased in the past two years as investors seek to diversify their portfolios to manage the post-Covid-19 uncertainty. Singapore HNWIs diversify away from their domestic market the most, with 59% holding less than 20% exposure.
On the sustainability front, there is an increased conviction among the region’s HNWIs that sustainability will deliver superior returns, with a change of emphasis from value-driven emphasis to a genuine anticipation of returns.
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The proportion of Asia Pacific HNWIs holding sustainable assets is on the increase, even though a significant number of them (45%) hold less than 20% of sustainable investments in their portfolios.
The region’s HNWIs are also now looking at sustainability from a risk/return perspective. Now that they see sustainability as a driver of returns, they want to understand the risk, and how such investments will perform in the short, medium and long term.
“Above all, risk assessment and management takes priority. This is where a robust portfolio construction process from private banks comes into play,” says Lombard Odier limited partner and Asia regional head Vincent Magnenat.
The Lombard Odier 2022 HNWIs Study interviewed over 450 HNWIs domiciled in Singapore, Hong Kong, Japan, Thailand, the Philippines, Indonesia, Taiwan and Australia.
