Singapore has become a hub for private equity in Asia.
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Ultra-wealthy Asia-Pacific investors are moving away from the ‘wait-and-see’ approach they took at the start of the pandemic as concerns about market volatility took hold, a new survey from the bank shows. private Swiss Lombard Odier.
The survey of 450 high-net-worth investors from the region – defined as those with at least $1 million in investable assets domiciled in Asia-Pacific – revealed their top concerns.
They understood how to manage current market volatility and geopolitical risks, as well as how to better diversify their portfolio to mitigate those risks, according to the 2022 HNW Individuals (HNWIs) study.
The urgency of these strategies has increased since the 2020 survey, Lombard Odier said.
“During the peak of COVID-19 in 2020, the majority of APAC HNWIs surveyed did not change their portfolio characteristics and adopted a wait and see approach,” said Jean-Francois Aboulker.
“This was mainly due to a lack of understanding of the risks involved and uncertainty about the evolution of the pandemic”.
Today, approximately 68% of investors in Singapore, Hong Kong, Japan, Thailand, the Philippines, Indonesia, Taiwan and Australia have realigned or changed their portfolios to better deal with current market conditions.
About 77% of respondents said rising inflation and the prospect of a recession were the most worrying. Singaporeans were the most worried about this condition.
“Even Japan, where inflation had been near zero for more than three decades, is now facing inflationary pressure, and 69% of Japanese HNWIs are worried about it,” the report said.
“It’s unclear whether the Bank of Japan will tighten, but a third of Japanese HNWIs believe it will happen in the next 12 months.”
Affluent investors in the region are generally less concerned about a possible rise in interest rates, mainly because they think most governments will be careful not to raise rates to the point of hurting economic growth, according to the report. ‘investigation.
However, Australian and Indonesian investors are not so sure. A majority of respondents in these countries, around 70%, say higher interest rates are a “significant concern”.
Investors in the Philippines are most concerned about geopolitical instability, while those in Hong Kong and Singapore also cited geopolitical tensions as one of the top risks over the next 12 months.
These investors are concerned about the impact of geopolitical risk and conflict on their investment returns, with many expecting lower returns ahead. They also worry about missing opportunities in this volatile time.
Many in Hong Kong and Japan have questioned the effectiveness of their current diversification strategies given the negative impact of the current environment of “falling equity prices, widening credit and interest rate spreads long-term highs” on their portfolios.
Two things happened
In an effort to mitigate these risks, two things happened.
Ultra-wealthy investors in APAC have become more conservative and are turning more away from traditional asset classes — such as stocks and bonds — to investing in their own businesses, the survey found.
Many have also placed money in “safer” assets such as silver and gold. Some are also investing in private assets, including private equity, private debt, real estate and infrastructure investments, and investors in Singapore and Australia are leading the charge.
Additionally, many investors have moved away from their home markets over the past couple of years. To manage post-Covid uncertainty, a more holistic combination of their portfolios has been the result and Japanese and Indonesian investors are actively doing so, according to the report.
“Even though the impact of Covid-19 is global, there are significant divergences in equity returns in different countries, and certain asset classes are underrepresented in certain markets,” said Aboulker of Lombard Odier.
“These investors are sophisticated and understand the importance of a long-term approach in finding assets beyond their home markets, while reducing their dependence on home factors.”