Geneva-based Union Bancaire Privée expects to receive a Singapore banking licence in the first half of this year and is in the process of hiring more staff across its Asian offices in Hong Kong and the Lion City.
Since it started to book assets in Singapore at the beginning of 2012, the private bank has doubled its assets under management – admittedly from a low level – and number of clients from 100 to 200.
UBP also added eight staff during the year to bring its Asia headcount to 26 (20 in Singapore and six in Hong Kong), around half comprising client-facing relationship managers and advisers. One executive joined from Swiss rival BSI last month and another is set to join from another boutique private bank in a month or so.
The headcount has risen more than sixfold since UBP set up its Asia private banking operation in the Lion City with four staff two years ago, and it plans to hire eight to 10 more staff in 2013, says Stephan Repkow, Asia CEO of private banking.
Boutique private banks that are relative newcomers to Asia and are not so well known in the region have been struggling to attract clients in this environment. Repkow acknowledges this, but argues that UBP is on the right track.
“The private banking business is not easy, and 2012 was no exception,” he notes, “yet we more than doubled our AUM and number of clients last year, as well as doubled our revenues for the full year.”
UBP has a capital markets services licence in Singapore and the equivalent type 1 (dealing in securities), type 4 (advising on securities) and type 9 (asset management) permits in Hong Kong.
It also offers booking services in the Lion City with the help of its third-party custodian, but cannot yet do the same in Hong Kong. Nor is it yet applying for a banking licence in Hong Kong, although it could explore that down the line.
“At the end of the day, you have to provide clients with a top-notch level of service,” says Repkow, but it’s less significant where the booking centre is, as long as there is one in Asia to compliment that in Switzerland. “Our Asian clients are very comfortable with having Swiss and Singapore booking capacity,” he adds.
The main factor is diversification, adds Repkow, and the fact that it makes sense to book assets in Asia if that is where most of your investments are made.
UBP’s assets are sourced evenly across North and South Asia; in 2012 the biggest-ticket deals came from North Asia – particularly Hong Kong. This is largely due to a handful of landmark, highly structured deals for North Asian clients last year, with a typical transaction size of $25 million.
A typical investment deal done last year involved a principal-protected structure, with the underlying asset class left to the client’s discretion (one of the deals referenced municipal bonds), says Repkow.
Such transactions usually seek low volatility and low expected returns (3-5% in US dollar terms), but providing a form of cash management solution that has been increasingly popular.
This enables clients to invest in a low-risk asset class, but retain the ability to use cash at any point in time, he notes. It’s very compelling for entrepreneurs or ultra-high-net-worth individuals who are cash-rich and don’t have an immediate need for liquidity, adds Repkow, but who want to retain a flexible cashflow to take opportunities in other asset classes or in their own businesses.
“There’s been a lot more interest in these kinds of deals in recent years, as there’s very little value in fixed income in terms of yield right now, even in the so-called high-yield space,” he says. He notes the US high-yield corporate bond index went below 6% for the first time a few weeks ago.
Asked where UBP has seen client interest in alternatives, Repkow notes a growing number of requests but a slow pick-up in Asia for managed hedge fund accounts, which is one of the firm’s specialities.
UBP can tailor specific portfolios depending on the type of strategy sought, from $5 million upwards, says Repkow. “The reality in Asia is that there’s relatively low demand for managed [hedge fund] products. Interest is rising, but they are still behind the curve in terms of portfolio allocation compared to European investors.”
So where has there has been interest, which strategies have been sought? Last year there was quite strong demand for special-situation, activist hedge funds as well as fixed income/credit strategies, he notes, and that’s likely to remain the case.
Investment in fixed income strategies, however, will probably slow down this year, says Repkow, given that the sector has already performed extremely well in 2012 and is becoming too expensive, leading investors to take profits.
As for private equity, there has been little demand there either, he notes, as Asian wealthy families and entrepreneurs still tend to favour direct PE investments rather than those through intermediaries.