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The biggest concern of high net worth, super rich investors in Asia Pacific

by SuperiorInvest

Singapore has become a center for private equity in Asia.

Roslan Rahman | AFP | Getty Images

Ultra-wealthy investors in Asia-Pacific are moving away from the wait-and-see approach they took at the start of the pandemic as concerns about market volatility emerged, a new survey by Swiss private bank Lombard Odier showed.

A survey of 450 wealthy investors in the region – defined as those with a minimum of US$1 million in investable assets based in Asia Pacific – revealed their biggest concerns.

According to the HNW Individuals (HNWI) 2022 study, these included how to manage current market volatility and geopolitical risks, as well as how to better diversify your portfolio to mitigate those risks.

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 how the pandemic will evolve.”

High inflation

Now, about 68% of investors in Singapore, Hong Kong, Japan, Thailand, the Philippines, Indonesia, Taiwan and Australia have adjusted or changed their portfolios to better suit current market conditions.

While the impact of Covid-19 is global, there are significant differences in stock returns across countries and some asset classes are underrepresented in some markets.

Jean-Francois Aboulker

Odier of Lombardy

Some 77% of respondents said rising inflation and the prospect of a recession were the most worrying. Singaporeans were most concerned about this state of affairs.

“Even Japan, where inflation has been close to zero for more than three decades, is now facing inflationary pressures and 69% of Japanese HNWIs are concerned,” the report said.

“Whether the Bank of Japan will tighten remains unclear, but a third of Japanese HNWIs believe it will in the coming 12 months.”

Rising rates

Wealthy investors in the region are generally less worried about a possible rise in interest rates, mainly because they think most governments will be careful not to raise rates to the point that it could hurt economic growth, the survey showed.

However, Australian and Indonesian investors are not so sure. The majority of respondents in these countries, around 70%, say that higher interest rates are a “significant concern”.

Geopolitical risks

At the same time, investors in the Philippines are most concerned about geopolitical instability those in Hong Kong and Singapore also cited geopolitical tensions as one of the top risks in the next 12 months.

These investors are concerned about the impact of geopolitical risks and conflicts on the returns on their investments, with many expecting lower returns. They also fear that they may miss out on opportunities during this period of volatility.

Many in Hong Kong and Japan have questioned the effectiveness of their current diversification strategies given how the current environment of “falling equity prices, widening credit spreads and high long-term rates” has negatively impacted 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 moving away from traditional asset classes – such as stocks and bonds – to invest in their own company, the survey found.

Many also put money into “safer” assets such as cash and gold. Some also invest in private assets, including private equity, private debt, real estate and infrastructure, led by investors in Singapore and Australia.

In addition, many investors have moved out of their home markets in the past two years. To manage post-Covid uncertainty, the result has been a more global mix in their portfolios, and Japanese and Indonesian investors are actively doing so, the report said.

“While the impact of Covid-19 is global, there are significant differences in stock returns across countries and certain asset classes are underrepresented in some markets,” Lombard Odier’s Aboulker said.

“These investors are sophisticated and understand the importance of taking a long-term approach in seeking assets outside their home markets while reducing their reliance on domestic factors.”

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