Like a number of other Malaysian fund houses and product distributors, HwangDBS Investment Management is sharpening its focus on the domestic wealthy-investor segment.
This is a trend also emerging in other Southeast Asian countries such as the Philippines and Thailand, as they see more potential growth in the retail business than on the institutional side.
HwangDBS IM is not looking to compete with the onshore retail banks in Malaysia or the offshore private banks, but aiming for the space between mass-affluent and full high-net-worth clients, says Steve Lim, chief product officer at the firm in Kuala Lumpur.
“If you have RM250,000 [$83,000] you can open an account with a priority banking centre at a foreign bank in Malaysia,” he points out. “And if you have more than $1 million you can use offshore private banks.”
“To do meaningful asset allocation, clients need to have at least RM2 million,” he adds. “We’re looking at that sort of account size.”
The HNWI business accounts for 1-2% of the firm’s total RM11 billion in AUM. “If we can push the HNWI segment proportion to 5-10% within the next five years, that would be a very nice number to work on.
“Our wealth management initiative is a product of what we saw in the crisis,” says Lim. “After the crisis, most Asian clients’ investment policies and direction have been driven by financial advisers,” he says, “And most are just chasing returns and have little idea about the risk profile of their investors and how it matches their asset allocation or life stage.”
Previously HwangDBS IM’s main focus had been institutional and mass-retail clients. For example, its unit-trust business has been growing, but fierce competition has put margins under pressure, says Lim. “So we tap into the high-net-worth market, offering exposure to underlying asset classes rather than purely mutual-fund offerings.”
Since Lim joined HwangDBS IM in late 2009, he says the firm has sought to put in place a process to guide clients in terms of asset allocation that is “more consistent with their investment objectives and risk profile”. The asset allocation process allows investors the opportunity to tap into the broad universe of onshore and offshore fixed-income paper and equity IPOs directly on a non-discretionary basis.
The fact that fund management firms can now invest 50% of their portfolio offshore (as of 2007) has helped them to access a wider and more interesting range of products for their clients. It has also helped local fund managers to develop know-how in managing foreign assets.
“We can help clients with offshore paper; we can go to Hong Kong to look for ideas or even the US, UK or Australia,” says Lim. “I don’t think we’re too far behind private banks in Singapore and Hong Kong in terms of our investment universe now.”
However, Lim sees this as a relatively gradual move. “Until we get the budget to boost our infrastructure, we can’t do it on a big enough scale to compete with offshore private banks,” he says.