Bank of Singapore, the private bank owned by OCBC, is looking to become more active in the alternative investments arena.
It is building a new investment and operational due diligence framework for hedge funds, and is also planning to offer more bespoke private equity investments to its sophisticated clients.
“We are positioning to move further into alternatives – private equity and hedge funds – in a very measured and methodical way,” said John Ng, head of research and head of product marketing at BoS. He did not give any more specific details in terms of time-frame or asset type.
The aim of the planned hedge fund capability is to “help us separate the wheat from the chaff”, noted Chandrima Das*, the bank's head of funds solutions.
BoS does not currently offer much in the way of hedge fund investments. “We’re very sparing in our approach to them, for many different reasons,” said Ng. “We focus more on the long-only sector.”
He pointed to the challenges of allocating hedge funds – not only do they raise operational, investment and liquidity risks, but they also can have reputational consequences for distributors.
What's more, Das told AsianInvestor: “Hedge funds haven’t done much for client portfolios in the past couple of years.”
But BoS now is aiming to boost its use of hedge funds to play tactical themes in client portfolios that cannot be done via long-only strategies.
Hedge funds are becoming more Ucits-compliant, added Ng, “so we are looking at them from that angle; at products with better liquidity and disclosure."
There is a growing trend in Asia for investors to consider so-called liquid alternatives, such as funds of hedge funds with daily liquidity.
Asset managers are responding by moving to launch such products. Gottex, JP Morgan Asset Management, Natixis Global Asset Management and Permal are among those focusing more on this area.
Meanwhile, BoS has been active in PE funds for some time. “Depending on a client’s risk appetite, taking a small allocation to private equity makes sense,” said Ng. The bank has about 10 such strategies on its platform. That compares with 100 to 120 mutual funds.
As for other alternative assets, property is of interest for many of BoS's clients, he added, hence the bank has a real estate financing team.
Infrastructure funds, however, are not in great demand, noted Ng. “We look at them in response to small pockets of interest.”
* An interview with Das and Ng appears in AsianInvestor's inaugural Fund Selector Special Report, which will be distributed to a selected audience in the coming week.