As part of plans to add hundreds of new staff with a view to expanding in China, UBS will place a particular emphasis on asset management, says Kathryn Shih, newly appointed president for Asia Pacific.
Having taken up the role at the start of the year, Shih said UBS saw a lot of growth potential in asset management as part of its regional plans, which also incorporate wealth management and investment banking (for more on the latter, see this article on FinanceAsia today).
“As all economies develop, they have investment banking deal opportunities, and then the market becomes more ripe for asset management,” Shih added.
The group has a local asset management joint-venture in China with SDIC and two wholly foreign-owned entities, one in Beijing and one in Shanghai, through which it is building its onshore investment business. Ling Xinyuan, China chairman of UBS AM, last week outlined details of the firm's country strategy.
It’s early days, however, and Shih declined to offer estimates on goals for assets under management. But she argued that high-single-digit or even faster growth was feasible, given the rapid economic growth in China and the wider region.
Shih believes the major volatility in China’s local equity market since the summer of 2015 has underscored the benefits for domestic investors of adopting genuine international asset management services.
“The A-share market has been extremely volatile, and investors need to look offshore to invest and even diversify their assets onshore,” said Shih. “Added to that, investors are clearly becoming less happy with what they are holding, with so-called wealth management products not really being that at all, but [actually] leveraged products.
“There is education needed, but recent turmoil is making local investors realise that they cannot expect 10% or 15% yields, but in the single digits [instead],” she added.
As part of its efforts to grow in China, UBS is awaiting a licence to open a bank branch subsidiary in Xintiandi, Shanghai.
The licence will enable it to take renminbi deposits and offer RMB-denominated products such as local bonds and funds. When combined with its securities joint venture, this means it will be able to offer its local high-net-worth clients a broad array of local and international investments, the latter via the qualified domestic institutional investor (QDII) scheme.
Beijing has put handouts of QDII quota on temporary hold, but Shih is confident of appetite for offshore assets once they begin again. “If the local market continues to gyrate,” she noted, “it’s likely more local investors will find the stability of foreign markets more appealing, particularly if the renminbi continues to depreciate.”
Meanwhile, chief executive Sergio Ermotti said this week that UBS planned to double its overall China headcount to 1,200 from 600. This includes more than doubling the number of wealth managers it has in the country.
Ermotti also reinforced Shih’s emphasis on asset management, predicting that China would increase its outward direct investment. Overseas investment via QDII stands at just $90 billion, he noted, as against the $9 trillion in Chinese domestic retail deposits.
Beyond China, UBS believes there is more value to be extracted from tapping its relationships with wealthy clients in the region and servicing those individuals in other areas.
“A lot of Asian companies are still owner-controlled, so if you have access to these people you have access to a lot of the corporates that matter,” said Shih. “That is easy for me, as I’ve been working for 29 years in this business, I know where we can reach out and who needs what, so it’s much easier for me to help connect them [with the right areas of the bank],” she said.
She pointed to one example of a HNW individual she met last week, who wanted to invest $2 billion into real estate in Australia and China. Shih passed the client’s needs to the investment banking team, which has since sourced property investments. “These sort of cross-division opportunities happen a lot,” she noted.