Wealthy Asians ready to take discretionary plunge
Wealthy Asians lost a lot of money in the financial crises of 1997 and 2008 and are ready to turn to discretionary portfolio management, believes ABN Amro’s regional private banking chief.
Hugues Delcourt was talking up the firm’s budding discretionary portfolio management (DPM) business in Asia. It comes after the firm hired Jacqueline Koo from Julius Baer in a new role as head of Asian DPM based in Hong Kong, as reported by AsianInvestor.
Koo told us she is building two model reference portfolios, one for Asian equities and one for Asian debt, over the next two months and thereafter aims to attract discretionary mandates from wealthy Asians.
ABN Amro’s wealth management unit, which has $18 billion in AUM across Hong Kong, Singapore and Dubai, estimates that just 4% of HNW clients in Asia have taken up discretionary mandates with private banks in the region. That compares with 15-30% penetration in Europe.
Delcourt says ABN Amro sees an opportunity to differentiate itself. “Many banks would have a discretionary portfolio management offering, but it would not be specific for Asia,” he notes.
“We believe the penetration of DPM in Asia among Asian investors will increase in future and that these investors will want an Asia-specific mandate rather than a globally diversified one.”
He reasons that wealthy Asians have lost large sums during repeated financial crises and are ready to approach investment differently now by entrusting wealth to “specialised teams to ensure a consistent return over a period”.
He adds his expectation that provision of such a service will glean a healthy European following: “Many European families have done little investment in Asia through funds, but they are now saying it makes sense to have 10-25% of their wealth booked in Asia managed by Asians on Asian products. That’s something that is reinforcing the rational for creating this DPM product.”
ABN Amro’s private bank saw the biggest decline in AUM of any of the top 20 global players last year, sinking 13.67% to $190 billion, according to Scorpio Partnership numbers. That saw it slip down the list to 14th spot globally.
Now it aims is to double its Asia AUM to $35 billion in five years. It has been hiring, but in many ways is still in rebuilding mode following the 2007 acquisition (and subsequent break-up) by a consortium made up of the Royal Bank of Scotland Group, Fortis and Banco Santander.
Maaike Steinebach, the firm’s Hong Kong CEO, notes that ABN Amro does not have a QFII licence any longer and is currently exploring its options in this regard. “We used to have quite a big QFII licence when we had a big onshore presence,” she reflects.
“But that was part of the breakup of the bank, that part went to RBS so we lost our onshore presence. It’s kind of like a monopoly game, we have to go back to the start.”
The bank opened a representative office in Shanghai this April, but it will take two years before the office can be converted into a branch in accordance with local regulations. “In the mean time we are exploring alternative ways to enter [China's onshore capital markets],” says Steinebach.