WHOS WHO IN

PRIVATE BANKING

The Business Times | Wednesday, February 25, 2015

PHOTO: BLOOMBERG

GROWING BUSINESS

Private banks experienced a solid 2014 with strong net new money inflows and in 2015,
they see opportunity amid volatility and an uncertain macro environment. BY SIOW LI SEN

SIAs private banks,

especially the global players,
had a great 2014 even as the
industry grappled with
higher market volatility, ever
increasing regulatory
burden and a trend towards
domestic banks.
Last year, the two Swiss wealth management
giants UBS and Credit Suisse posted record
net new money and strong double digit growth
in assets under management (AUM) for their
Asia-Pacific businesses. In Asia, UBS and Credit
Suisse were respectively ranked number one
and three largest private banks in 2013.
UBS, the largest global wealth manager in Q4,
saw its Asia-Pacific AUM rise 51-269 billion Swiss
francs (S$73-386 billion), or grow 23.3 per cent,
more than double the 11 per cent gain in 2013.
Net new money for the Asia-Pacific in Q4 at five
billion Swiss francs was a 7.8 per cent growth
year-on-year.
Asia-Pacific net new money inflows for full
year 2014 at 26.8 billion Swiss francs was the
highest from the region since 2007 and
represented 78 per cent of the groups 34.4
billion Swiss francs of net new money.
Edmund Koh, head of South-east Asia and
APAC Hub, Wealth Management, UBS, said that
the banks success in attracting net new money
is due to a number of hallmarks that are
difficult to replicate.
We have a strong brand and track record in
serving Asian clients, with 50 years in the
Asia-Pacific, he said. UBS has one of the most
extensive product platforms, which provides our
clients with research-based advisory solutions.
It has 900 analysts, strategists and fund
managers covering every major geography,
sector and asset class around the world. We
have a network of many tens of thousands of
clients, with the experience that comes with
servicing these clients, said Mr Koh.
UBS is also a top investment bank in the
region, particularly in the areas that are crucial
for wealth management, such as corporate
client solutions and equities, he added.
In March last year, the bank introduced UBS
Advice, which monitors client portfolios against
their chosen investment strategy and the UBS
house view. Clients are alerted of matching
opportunities and risks, but have full control
and discretion over their investment decisions,
within a simple, flat-fee structure.
Demand has been strong. Since its launch in
March 2014 in Hong Kong and Singapore, the
platform had secured over one billion Swiss
francs AUM from Asian clients, said Mr Koh.
UBS has 1,186 client advisers and more than
2,500 staff in wealth management in the
Asia-Pacific, making it the largest team of any
private bank in the region, he said. Last year, it
added more than 200 front staff.
Credit Suisse private bankings Asia-Pacific
business had a record-breaking year in 2014,
with net new assets at a historical high of 17.3
billion Swiss francs, up 50 per cent, said its
head Francesco de Ferrari.
The regions AUM rose to 143.5 billion Swiss
francs, a gain of 24 per cent, while the number
of relationship managers reached 490 compared

to 440 at the end of 2013, as the bank continues

to attract, in particular, senior bankers, said Mr
de Ferrari.
Credit Suiss also has an integrated private
banking platform to deliver wealth management
and investment banking solutions to clients.
The cross-divisional collaboration revenues
we generated by providing investment banking
solutions to ultra high net worth (UHNW) private
banking clients increased by 20 per cent
year-on-year in 2014, and more than tripled in
the past three years, he said.
Citi Private Bank, the third largest in Asia,
said that its AUM rose 7 per cent to US$255
billion in 2014.
Jessica Poh, Citi Private Bank global markets
manager Asean region, said that last year, the
industry faced increased regulatory expectations.
However, we view these changes to be
positive to the industry overall and necessary
to safeguard Singapore as a reputable and safe
wealth management centre, said Ms Poh.
Internally, we have undertaken initiatives
to further enhance our controls and refine
our processes.
At the macro level, the uneven growth in the
global economy and increased market volatility
resulted in clients taking a more cautious
approach on their investments, said Ms Poh.
Also growing its AUM in single digit last year
was Barclays. The bank did not disclose actual
2014 AUMs as it will only report full year results
next month.
Still the UK-based bank is committed to the
wealth management business in Asia and over
the next five years. It aims to more than double
AUMs and will be looking to hire 25 per cent
more bankers in 2015 to support its ambitions,
said Didier von Daeniken, head of wealth
management, Asia-Pacific, Middle East and
Africa, Barclays.
Barclayss 2013 AUM in Asia was USD$36.5
billion and it currently has about 100 private
bankers in Singapore and Hong Kong.
Singapores domestic private banks enjoyed
double digit AUM growth in 2014.
2014 was a milestone year for DBS Private
Bank, as it completed its first merger with the
acquisition of Societe Generale Private Banking
Asia (SGPB).
AUM for high net worth clients increased by
34 per cent year-on-year to reach S$91.6 billion,
at end 2014, said Tan Su Shan, DBS group head
of consumer banking and wealth management.
With the acquisition, we transferred about
US$10 billion in AUM and the majority of SGPB
staff including more than 80 per cent of front
office employees to DBS, said Ms Tan.
As part of the DBS group South-east Asias
biggest bank it meant the private bank often
had a front row seat in helping clients access
equity and fixed income deals.
Our expertise and leadership in the equity
and debt capital markets in Singapore has
allowed us to provide clients with access to a
record number of equity and bond IPOs in
2014, said Ms Tan.
We were also able to provide more than 20
clients the opportunity to participate as
cornerstone or anchor investors in several IPOs,
and obtain preferred allocations.

On the trend towards domestic banks, Ms

Tan said that for UHNW clients, the offshore
banking proposition will always hold some
appeal, as a way of diversification and access to
global markets.
Bank of Singapore, the private bank unit of
OCBC Bank, saw its 2014 AUM grow to US$51
billion, up 11 per cent and more than double the
AUM recorded when it first started operations in
January 2010.
Net new money was US$5 billion as at Dec 31,
2014, said Bahren Shaari, chief executive of
Bank of Singapore.
We maintained our strong performance in
Singapore, Indonesia, Malaysia, Thailand and
the Philippines, further strengthening our
position as Asias global private bank, he said.
Its discretionary portfolios, a much
sought-after core investment among clients,
accounted for 7 per cent of total AUM, said
Mr Shaari.
Overall, our mandates have consistently
posted returns of more than 6 per cent annually,
he said. The total AUM of our discretionary
portfolios rose 15 per cent from a year ago,
having risen more than six-fold since 2010.
Total staff strength increased 11 per cent to
almost 1,330, said Mr Shaari.
Singapores United Overseas Bank (UOB) last
year brought in a new management bank for its
private bank business.
This year, we will be focusing on
strengthening two important pillars of our
business people and investment solutions,
said Ong Yeng Fang, head of private
banking, UOB.
She did not disclose UOBs private bank
AUM. UOBs wealth management AUM, which
includes that of the private bank business,
grew from S$48 billion to S$80 billion between
2010 and 2014.
Wealth managements profit contribution to
our retail business increased from 24 per cent
in 2010 to 47 per cent in 2014, she said.
As for the investment outlook in 2015,
volatility and an uncertain macro environment
represents opportunity, said bankers.
ABN AMRO Private Bank said that
diversification is key as markets face greater
volatility this year.
This, however, should not be seen as a
threat but an opportunity to enter the market,
Hans Hanegraaf, ABN Amro chief executive
private banking Asia & Middle East said.
Overall, the bank is overweight on equities,
particularly on the European and Asian emerging
markets, as accelerated economic growth, lower
energy prices and a strengthening US dollar
would support earnings.
Within Asia, we are favourable towards the
equity markets in China, India and Indonesia,
he said.
ABN Amro is bullish on Asia emerging
market currencies, which are better placed for
the expected increase in US interest rates this
year. Some currencies, such as the Singapore
dollar, have emerged as safe haven assets,
rising after the conflict between Russia and
Ukraine erupted.
We see that the drop in energy prices is
boosting global growth and reinforcing strong

US consumption, said Arnaud Tellier,

chief executive of BNP Paribas Wealth
Management, Singapore.
The latter is producing positive second
round effects, such as increased demand for
Asia's exports. As a consequence, there is now a
debate in financial markets about how soon the
US will be hiking interest rates but the key
message is that monetary conditions will
normalise only very slowly, said Mr Tellier.
In this environment of increased volatility,
we see ample opportunities to generate
handsome returns this year, ultimately
backstopped by accommodative monetary
conditions and low energy prices.
lisen@sph.com.sg
@SiowLiSenBT

LIST OF BANKS
ABN AMRO Bank NV
Private Banking

PAGE 6

Bank of Singapore Ltd

International Private Bank

PAGE 7

BNP Paribas Wealth Management

PAGE 8

BSI Bank Asia

Citi Private Bank

PAGE 9
PAGE 10

Credit Agricole (Suisse) SA

Private Banking

PAGE 11

Credit Suisse AG

PAGE 12

DBS Private Bank

PAGE 13

Deutsche Asset &

Wealth Management

PAGE 14

EFG Bank AG

PAGE 15

Standard Chartered Private Bank

PAGE 16

UOB Private Banking

PAGE 17

UBS Wealth Management

Singapore

PAGE 18

Contents
Finding the right balance

A year to widen your investment horizons

Commitment from generation to generation

Digitalising in the new era

Consider using universal life insurance

in succession planning

Eyeing Asian and emerging markets

Overcoming key challenges in

family office investing

What investors should know about risk-based

investment products

Realising the investment potential of China firms

Diversifying effectively in a divergent market

Global trends to influence Asian financial assets

Supplement Coordinator: Siow Li Sen Sub-editor: Kelvin Lee Cover design: Hyrie Rahmat Advertising sales: Adeline Sim, Jean Koh; 9889 0420

| WHOS WHO

IN PRIVATE BANKING

The Business Times | Wednesday, February 25, 2015

Finding the right balance

When assisting clients in shaping the overall risk profile of their investment portfolios, private banks need to be prudent in
using investment leverage and derivative solutions as these are not without pitfalls. BY LIM SOON CHONG

OR quite some time

now, investment
leverage and derivative solutions have
been pervasive features of investment
portfolios of private banking clients. The investment thesis underpinning these developments is irrefutable: investment leverage and derivative solutions are tools that assist clients in shaping the overall risk profile
of their investment portfolios. They
make it easier for clients to execute
portfolios that more closely reflect
their risk appetites, allowing them to
disaggregate and to defease specific
risks. The use of investment leverage
and derivative solutions, however, is
not without its pitfalls.

PITFALLS
The common pitfalls of using investment leverage and derivative solutions include: (i) currency mismatches (ii) term mismatches and (iii) misuse of leverage. These pitfalls impede
the construction of investment portfolios and customer balance sheets that
would be resilient to economic and
market shocks.
Currency mismatches can arise in
many ways. Clients may acquire fixed
assets and investment assets globally. They may use loans to buy properties in a foreign jurisdiction. At the
same time, their operating business-

es may have suppliers who expect

payments in different currencies. Often times, there could be auxiliary reasons why loans may be denominated
in currencies other than the denomination of the asset. For example, a client may use a Japanese yen-denominated loan to acquire a Hong Kong office building as a result of favourable
financing. Or simply because the client has a dim view of a funding currency or wants to benefit from lower
nominal interest rates.
Term mismatches usually occur
when loans that reset or mature at a
short horizon are taken to finance relatively illiquid assets or assets with
fixed payouts. Under such scenarios,
it is possible that interest rates may
spiral higher and income from the investment assets is insufficient to service the loan repayments.
Relative to currency and term mismatches, the risk of misuse of leverage is more familiar to most. Investment leverage can be a useful servant
in the quest for enhanced returns, but
it can also be a cruel master when the
investment environment sours. No
matter how rosy the outlook, the best
investment thesis can be defeated by
forced exits arising from transitory
valuation changes before the investment thesis has had a chance to exert
itself to produce returns.
Given the pitfalls highlighted
above, clients should consciously review and identify the imbalances in

their balance sheets and investment

portfolios with the help of their private banks. This is especially relevant
in todays environment of low nominal interest rates as heightened volatility of exchange rates could easily
impede the generation of significant
returns on investment portfolios. Similarly, for clients who could be adversely exposed to rising interest
rates, management of liquidity and interest rate exposures through liability
management or the use of derivative
hedging strategies has become a critical issue for their overall financial
well-being.

FUNDAMENTAL TENETS
To successfully help clients navigate
a turbulent investing environment,
private banks need to adhere to the
fundamental tenets of KYC (Know
Your Client), account planning and
prudence in advising clients on balance sheet construction and liability
management, even as they focus on
helping clients generate attractive returns on investment portfolios.
Account planning starts with relationship managers spending considerable time to know and understand
clients risk appetites, investment objectives, life plans and liquidity requirements, so that investment solutions are both relevant and encompassing. Building up trust and increasing the depth of understanding of a
clients global investment and busi-

ness activities take time and effort on

both sides. Sometimes a private
banks relationship with a client starts
off from a satellite portfolio of relatively concentrated financial investments only, with the investment assets subject to the private banks advisory being a fraction of the clients entire net worth. This poses a challenge
for relationship managers, but is a reality that needs to be carefully navigated in todays competitive environment.
In cases where it is not possible to
construct a holistic picture of a
clients mismatches for their private
investments and operating businesses, the approach to take is to avoid inadvertently creating balance sheet imbalances. When implementing derivative solutions, private banks need to
put in place a multi-step quality assurance process before a new derivative
solution is launched. Besides the
standard investment thesis formation, basis mismatches and leverage
need to be explicitly considered. Private banks need to closely review critical terms of embedded derivatives,
so that the payoff structure expresses
fully the specific investment thesis. A
comprehensive risk classification
methodology should also be applied
in customer selection. These steps
help to ensure that the derivative solutions are specific to the investment
thesis and are delivered to customers
with the risk appetites to accommodate the risk profile of the solution.

Prudence, in essence, means that

clients are advised to assess their
risks against their goals and to retain
a margin of safety such that the market value of their investment portfolio is always in excess of the loan outstanding as determined by the loanable value, also known as the collateral
value, set by the banks. This is otherwise known as collateral adequacy.
Collateral adequacy is a function
of risk commensurability: investment
portfolios which are highly concentrated, less liquid or are expected to
be more volatile will be accorded a
lower financing quantum. Collateral
adequacy also takes cognisance of
the multi-currency nature of clients
investment portfolios, as currency
movements can affect the valuation
of assets in the clients reference currency. Hence, a client may make use
of margin facilities to put on currency
derivatives hedges to protect the value of his/her investment portfolio. In
calculating and monitoring the margin requirements of the client, it is
thus necessary to take into account
up-to-date valuations of currency derivatives and on the underlying assets. These three steps of collateral adequacy, risk commensurability and
regular currency translations often result in an iterative and customised
process that needs to be agreed
among client advisers, risk managers
and clients. It is challenging to manage, but the outcome can be rewarding.

Mr Lim: Private banks need to

adhere to the fundamental tenets
of KYC (Know Your Client), account
planning and prudence in advising
clients on balance sheet
construction and liability
management, even as they focus on
helping clients generate attractive
returns on investment portfolios.
Often, clients see collateral adequacy as the means by which banks employ to protect themselves. However,
in reality, the prudent use of leverage
aligns the interests of the clients and
the banks in helping to ensure the resilience of investment portfolios. The
key is to strike the right balance on
the prudent use of leverage and vigilance in employing derivative solutions to shape the portfolios risk profile in a manner agreeable to a client
and her bank, while avoiding the misuse of such strategies.
The writer is head of Regional
Investment Products & Advisory,
Consumer Banking Group & Wealth
Management, DBS Bank

A year to widen your

investment horizons
By Steve Brice

The goals of high net worth individuals

are longer-term and oriented towards
future generations. PHOTO: ST

Commitment from generation to generation

By Raj Sriram
ITS well known that the number of
high net worth individuals (HNWIs) in
Asia is growing faster than any other
region in the world, with Singapore at
the vanguard of the millionaires-per-capita rankings.
Very little of the wealth in Asia
could be characterised as old money especially when compared with
that of the regions more recent first
and second generation entrepreneurs. Certainly though, neither
group has had the exposure to private banking in some cases dating
back centuries common among
many wealthy families in Europe.
Most research still suggests that
Asias wealthy are more hands-on in
managing their wealth than HNWIs in
Europe. The concept of choosing and,
more to the point, trusting a private
bank is relatively new in Asia where,
statistically, clients are still twice as
likely as Europeans to spread the
risk by maintaining relationships
with three or more banks.
So with a lot of Asias money relatively new, how relevant is the heritage of private banks like mine and
many others? After all, sentiment
isnt reflected on the balance sheet or
assets under management (AUM).
Yes, what matters most are performance, watertight governance and
compliance and, in private banking in
particular, the quality of a banks relationship managers. Never mind how

good he might have been, a banker

who died a century ago cant offer a
client much in the way of advice today.
Yet theres a reason why, I believe
tradition, experience and integrity
are increasingly resonating with the
wealthy in Asia.
Its because the concept of private
banking is arguably more intrinsic to
Asian traditions and the importance
attached to generations past and future than even in Europe where private banking was born.
Some family clients of ours in Europe have been banking with us and
more importantly investing their
trust with us since the late 19th century. There are few industries in
which that happens and there can
be few better examples of a successful customer relationship.
Its usually a mistake to generalise
about Asian cultures but one commonality is the absolute commitment to
the security and future of the family;
its part of a social fabric that is tailored to the tenets of private banking
and vice-versa; private banking is
about bespoke responses to personal
and family and even corporate aspirations.
The growth of private banking in
Asia is dovetailing with changing attitudes to wealth management. Many
HNWIs in the region have now accepted the value of external advice and
perspective and the importance of
longer-term planning eschewing

their previous hands-on, play the

market approach. Successive Asian
and global financial crises were, no
doubt, part of that shift in strategy
and mindset.
Studies in China have supported
this notion of a change in investment
behaviour. Several years ago, the principal wealth management objective
cited by Chinese HNWIs in a Bain & Co
study was wealth creation. Fast forward to a more recent Bain China Private Wealth Report and thats now only the fourth priority: The top three
are wealth preservation (including
inheritance), quality of life and
childrens education.
While that study addressed only
one market, the same pattern is clearly emerging elsewhere. The goals are
longer-term and oriented towards future generations. That sounds rather
familiar if, like me, youre working for
a bank thats been around for a very
long time.
The fact is were now having the
kind of conversations with Asian clients on subjects such as legacy and
succession once almost taboo outside the family that weve been having with European clients for more
than a century.
You could argue that we will only
be able to say that acceptance of the
European private banking model
sensitive, of course, to regional cultures and nuances has been
achieved in Asia when we can point to
managing the wealth of a family from
generation to generation.

Mr Sriram: The concept of private

banking is arguably more intrinsic
to Asian traditions and the
importance attached to
generations past and future than
even in Europe where private
banking was born.
But its clear from the conversations our relationship managers are
now having with clients on deeply
personal issues and even from the
fee-based discretionary mandate
many Asian clients now favour that
there is a growing demand for private
banks who can earn, retain and grow
trust over many, many years.
The writer is deputy CEO and head
of Private Banking, Asia, BSI Bank

2015 IS shaping up to be quite a volatile year for financial markets. Oil prices ploughed new lows after losing
more than half of their value since
June 2014; multi-year-low commodity prices, besides excess productive
capacity and sluggish demand, have
driven consumer inflation below 0
per cent in Europe. Meanwhile, political uncertainty has increased in Europe with a far-left party assuming
power in Greece with a mandate to renegotiate the countrys debt.
Despite all this uncertainty, we remain relatively constructive on global
economic growth and asset prices.
The US economy is expected to accelerate in 2015 as the unusually harsh
winter seen in Q1 2014 is unlikely to
be repeated, while a strong job market fuels a consumer demand-driven
expansion.
Europe and Japan are also likely to
post slightly stronger growth on the
back of record low borrowing costs
and weaker currencies. The main
growth concern is in China, which we
expect to decelerate somewhat. However, this means that the authorities
in Beijing are focused on much-needed reforms to turn the worlds second-largest economy from an export
and investment-driven engine to one
powered by domestic consumption.
And that naturally represents a
trade-off between short-term and
long-term growth.
Meanwhile, the decline in oil prices should be a net benefit for the
world economy lower energy costs
boost disposable income of households, increase corporate profits and
keep inflation relatively benign. Low
inflation is allowing central banks to
loosen monetary policy more than a
dozen have cut rates so far this year
alone! Central bank action is helping
to keep borrowing costs low for both
consumers and companies. Loose
monetary policies are, in turn,
investors best friends in relatively
riskier assets such as stocks and higher-yielding bonds.
However, lets be clear its not going to be as easy a ride as the past six
years, during which global stocks
have more than doubled. Indeed,
2015 is likely to see traditional asset
classes generate lower investment returns than in recent years. Bond
yields have discounted a lot of disinflationary pressures, which means
any upside surprise on the
growth/inflation front could undermine bond returns as well. Also, the
first Fed rate hike of the cycle expected sometime in the middle of the year
is normally a period associated with
increased market volatility.
We do not think this is something
to be too concerned about. The Fed is
expected to raise rates only because
the US economy has recovered significantly from the financial crisis of
2008-09. Indeed, US employers hired
more workers in 2014 than in any

Mr Brice: We would recommend

investors consider complementing
global equity investments with less
traditional sources of returns.
year since 1999. The good news is
that the Fed looks keen to err on the
side of caution. Therefore, any rise in
interest rates is likely to be gradual
and well-signalled.
Thus, we do not believe that we
are near the end of the developed market-led bull rally in stocks. History
teaches us that equity markets usually rise well into a rate hiking cycle
usually until the Feds focus shifts
from supporting growth to combating inflation. We believe this transition is some quarters away. It is likely
to be a 2016, or even 2017, topic rather than a 2015 issue.
However, lower returns and higher volatility will make investment
gains feel much harder to achieve. It
is against this backdrop that we believe investors need to widen their investment horizons to areas less travelled. A more conventional approach
would be to buy developed market
and Asian stocks on dips, a strategy
we expect to remain profitable in
2015. It also includes investments in
a basket of income generating assets
such as high dividend paying stocks
and some Asian local currency bond
markets such as China and India. Finally, there are many alternative strategies (such as employing a covered
call strategy) that we believe will generate a good risk-return profile in
2015, relative to the more traditional
asset classes. However, this would require professional investment advice.
Overall, we remain constructive
on risk assets, despite the ongoing
volatility and the likelihood of the
Fed hiking interest rates for the first
time since 2006. However, we would
recommend investors consider complementing global equity investments with less traditional sources of
returns.
The writer is chief investment
strategist, Wealth Management Group
at Standard Chartered Bank

The Business Times | Wednesday, February 25, 2015

WHOS WHO IN PRIVATE BANKING | 3

Crucially, mobile
devices connected to
the Web are being
increasingly used to
access services and
make purchases on
the go. Among the
most popular for
the wealthy
segments of the
population are
tablets, the demand
for which grew
faster in 2013 than
for PCs at any point
in history.
PHOTO (LEFT): REUTERS

who can apply judgment and experience.

In fact, our comprehensive analysis tells us that the majority of our clients in Asia want to understand investment opportunities and
trade-offs to validate with their relationship manager. They also think in
the medium to long-term, relying on
their bank to deliver customised,
timely investment recommendations
and they appreciate support in understanding global markets and refining
their views and ideas. They want a digital service channel from the bank,
and yet still value above all that human touch from the relationship
manager.
Looking at the client from the perspective of how they manage their
wealth allows the bank to focus resources effectively on the most valued digital functionalities and offerings that generate true appreciation
among clients.
Banks capable of capturing the
complexity of wealth management in
an intelligent Web-based and user
friendly way will benefit from a tremendous competitive advantage.

Digitalising in the new era

Technology is changing the way people consume financial services, and private banks have to
reinvent themselves to capture this unique and lucrative opportunity. BY FRANCESCO DE FERRARI

HE global shift in
economic growth
towards developing countries has
caused a comparatively rapid increase in ultra-high
net
worth individuals in the Asia-Pacific
and Latin America, including record
assets managed in these regions.
The Asia-Pacific region is expected
to grow twice as fast as the global average in terms of millionaire wealth,
and to achieve the highest level of ultra-high net worth wealth by the end
of the decade.
Although this wealth accumulation attracts private banks from
across the world, many are challenged to scale their traditionally run
operations and meet the growing demand in a profitable way. According
to recent estimates, up to 80 per cent
of millionaire wealth in the Asia-Pacific remains unbanked.
Clearly, this is a unique and lucrative opportunity for private banks
but we need to re-define ourselves to
fit the new era environment, and address the needs of the new era clients
in the worlds most dynamic regions.

These needs have been transformed at their very core by the advancement of the Internet, as well as
smartphone and tablet-based services and seamless online purchasing. Crucially, mobile devices connected to the Web are being increasingly
used to access services and make purchases on the go. Among the most
popular for the wealthy segments of
the population are tablets, the demand for which grew faster in 2013
than for PCs at any point in history.
Six of the largest market places in
the world now belong to this intangible space called the digital market
place. By 2016, the Internet economy
will reach US$4.2 trillion in G-20 countries alone.

DISRUPTIVE INNOVATION
Technology is transforming every
business and the pace is increasing.
The digital world is affecting every aspect of our business landscape the
size of the market, growth potential,
profit generation capability, a new
way of thinking about everything we
do with data.
There is a shift of power taking
place in many industries, where the
power is moving from the service provider to the consumer.

This development has already had

a very profound impact on our industry. For wealth management in the
Asia-Pacific, the way people consume
financial services has been radically
influenced by the way that they consume any other service from any other Internet company, with their expectations elevated by their experience
outside of the banking industry.
Banking customers are increasingly using digital channels to contact
their banks, execute trades and purchase financial products. The digital
revolution has enabled numerous disruptive businesses on the periphery
of the banking space to develop online-only financial services spanning
from retail to wealth management
and trading.
Nevertheless, there is a fair chance
that most of todays start-ups will not
be here in a few years time, as the
true winners of the innovation battle
will be established players. The reason is simple, and yet powerful: banking is built on trust, which is a fundamental, irreplaceable value especially
when it comes to ones wealth and savings. It is trust, along with security,
that poses the biggest challenge for financial start-ups, as opposed to established banks with a strong capital ba-

sis, a franchise with tradition and history, far-reaching experience in dealing with sensitive data and most importantly, the capability to manage
peoples assets in a safe, conscious
and well-informed way.

A NEW SERVICE MODEL

PRIVATE BANK OF THE FUTURE

Clearly, making innovation a part of
how banks go about their business is
not a luxury, but a necessity. A recent
survey shows that more than 80 per
cent of high-net-worth individuals in
the Asia-Pacific expect most or all of
their wealth management relationship to be conducted through digital
channels in five years, compared to
around 60 per cent in the rest of the
world.
Successful banks of the future will
focus their efforts on generating
growth and while doing so, process,
product and service innovation will
be a crucial enabler. Banks that succeed in taking advantage of a digitalised business model will save substantial resources by increasing efficiency
and enabling their business to focus
on revenue generation.
Todays banks are already becoming banks of the future. At Credit Suisse, we are reshaping our client offer-

Mr de Ferrari: Making innovation

a part of how banks go about their
business is not a luxury, but a
necessity.
ing by capturing the opportunities of
the digital era and significantly improving our operational efficiency
and profitability using digital solutions.
Clients unrestricted access to the
Internet and consequential commoditisation of basic information doesnt
endanger our business provided, we
use it to our benefit.
Instead, we enable and empower
our clients to process an overload of
data, and invite them to engage with
us when it comes to complex decisions that is the difference between
an information provider and a trusted
partner and client-centric adviser

Technology and digitalisation of private banking are critical not only to

serve clients better but also enable relationship managers to become more
productive.
It is not just about creating a tool
that translates our usual work processes to the online world. It is essentially creating a new service model.
It curates information in a way that
is unprecedented, creating a pull instead of just traditional push. It has
far-reaching implications in terms of
content management and curation of
information for clients, and all these
need to be embedded and enabled into the organisation, requiring us to rethink the way we work, our processes
and tools.
In digitalising their services and offerings, private banks have to reinvent themselves and think in vastly
different ways in terms of managing
clients onboarding and the whole life
cycle of their wealth management
needs.
The writer is head of Private Banking
Asia Pacific, Credit Suisse

Consider using universal life insurance in succession planning

By Lee Woon Shiu
A LARGE portion of Asias economic
success can be attributed to entrepreneurs, a majority of whom are very
hands-on in managing their businesses. While this ensures a strong commitment to the business, it is just as
important to plan for the continuity
of the business when it is passed on
to subsequent generations.
In a recent research report (commissioned by the Labuan International Business Finance Centre) from The
Economist Intelligence Unit which interviewed family-owned businesses
in South-east Asia, 67 per cent of the
respondents said that they have
made arrangements to ensure continuity after their current leaders step
down. However, more than a fifth of
the respondents said that they do not
have a succession plan in place.
A succession plan is necessary for
the smooth transfer of wealth to heirs
and the continued success of your
business, especially if your children
are involved in the business. As the
patriarch, you would need to consider who will benefit from the estate,
the order in which they will benefit
and the amount or percentage of the
wealth that your children should receive. As a parent, you would also
want to ensure fair and meaningful
distribution of your wealth.
Whether the bulk of your wealth
lies in business assets, property or
cash, your aim would be to provide
for your future generation by leaving

them as much wealth as possible and

protect it from depletion as a result of
rising costs as well as economic and
business uncertainties.
Would you have sufficient wealth
to distribute equitably to those family
members who are not active participants in the business? Are there activities that may deplete your accumulated wealth in the future, such as potential creditors or lawsuits from disgruntled ex-spouses of your children? As
the patriarch of the family, you would
also want to ensure that there is sufficient liquidity to settle any outstanding debts incurred by the business
and settle any taxes such as inheritance taxes on assets located overseas.
An attractive wealth management
solution that can address such legacy
planning concerns is a universal life
insurance (ULI). ULI is a jumbo size
life insurance policy that provides a
guaranteed death benefit payable at
the demise of the life insured. This
presents entrepreneurs with the opportunity to accumulate cash value
and address issues such as:
Ensuring business liquidity and key
man insurance: This is applicable
particularly for clients who are highly
leveraged in their businesses and
who may face a severe liquidity
crunch in the event of the sudden demise of the key business owner. ULI
solutions carefully customised in conjunction with a wealth planning structure such as a trust, will ensure that
the family/business will have access

to a large reservoir of cash reserves

which can be tapped to pay off debts
and ensure the continuation of the
business.
Wealth equalisation: This is useful
for families whose core wealth resides in the business assets. Whereas
the conventional thinking was to distribute the business shares equally to
all beneficiaries, such distribution

may in fact create friction among family members if not all family members are actively driving the business
or where members may have drastically different visions for the future
of the business.
A far better manner for distribution would be to distribute the controlling stake to the family scion having the primary responsibility of the

CASE STUDY: USING UNIVERSAL LIFE INSURANCE (ULI) FOR

WEALTH EQUALISATION
Mr Tan is a successful entrepreneur who founded a manufacturing company in 1990. The value of his company is US$3 million. Mr Tan has three
children, a son who is actively involved in running the business and two
daughters, who are pursuing different careers as a veterinarian and as a
jewellery designer.
Mr Tan will let his son be the sole successor of his business as his
daughters will pursue their own careers rather than run his company. Mr
Tan still wants his daughters to have an equitable share of the estate upon his demise.
So Mr Tan decides to use US$2 million to purchase a ULI with a life insurance cover of US$6 million. Mr Tan also sets up a family trust where
the trustees will take responsibility for making a claim for the insurance
proceeds upon his demise, and distribute the insurance proceeds evenly
among his two daughters according to the precise mechanism and timeline set by Mr Tan.
So now, Mr Tans son will be the heir to his business interest valued at
US$3 million, while his two daughters will acquire at least US$3 million
each at the time of his death.
With premium financing from a private bank, Mr Tan can choose to
fund US$600,000 to incept the policy with US$6 million cover. Thereafter
he services the interest repayment of the US$1.4 million loan, with repayment of principal required only upon the demise of the life insured.
This case study, including the numbers used, is purely hypothetical

business, while tapping a ULI strategy

to create huge cash reserves that
would be distributed to ensure that
members not receiving business
shares are equitably treated. This
would also be instrumental in enhancing family harmony in the long term.
Wealth creation: With the increasing
cost of top quality education, housing
and living in the global metropolis,
we have seen clients increasingly driven to pursue solutions that would
leave a more valuable legacy for their
descendants. Clients who may have
been adversely affected during the financial crisis have also relied on ULI
solutions as a means of re-creating
the part of the pie that was ravaged
during the last global financial crisis.
Tax planning needs: With
inheritance/estate duty taxes hitting
a high of 40 per cent in the US and UK,
and with the imminent implementation of estate duty taxes in Thailand
and possibly China, clients are keen
to source for more optimal tax compliant liquidity solutions to pay such
huge tax liabilities that may be triggered upon their demise.
ULI policies are usually denominated in US dollars and the minimum premium for a policy is at least US$1 million. The minimum premium will depend on the profile of the insured and
the desired sum insured. The sum assured can go as much as US$100 million.
Most private banks offer premium
financing for ULI policies and in most

Mr Lee: A succession plan is

necessary for the smooth transfer
of wealth to heirs and the
continued success of your
business, especially if your children
are involved in the business.
cases, clients may choose to only
fund around 30 per cent of their premium to incept a policy. The remaining 70 per cent premium will be financed by the bank. It is a little bit
like buying a house when you offer
mortgage financing to the client. At
Bank of Singapore, we work with insurance brokers to offer strategic ULI
solutions to clients and to ensure that
the clients policies are reviewed on
an annual basis to keep a close track
on the policys performance.
The writer is Lee Woon Shiu, head of
Wealth Planning (Trust & Insurance),
Bank of Singapore

| WHOS WHO

IN PRIVATE BANKING

The Business Times | Wednesday, February 25, 2015

Overcoming key
challenges in family
office investing
By Bassam Salem
FAMILY offices (FOs) are as unique as
the families they serve. Many also
share very similar characteristics that
have made them successful entities
in their own right. However, where
some do not attain the standard they
seek, there are some practical guidelines that can put them on the right
path towards achieving more consistent investment outcomes.

Indian Prime
Minister
Narendra Modi is
laying down the
foundations for a
broad investment
recovery; the
three key reforms
are the land
acquisition law,
labour reform,
and the
introduction of a
national goods
and services tax.
PHOTO: REUTERS

SCALE
One of the most significant mismatches in FO investing is in the allocation
of investment resources. Why? FOs
are called upon to manage diverse
multi-asset portfolios, often with a
minimum of staff, research services
and technology. Demands are more
pronounced when the family head
wishes to make direct investments in
venture capital, private equity or real
estate. Hiring, motivating and retaining top investment talent is a challenge for even the largest global asset
management firms. FOs need to field
a team that can manage to family expectations or consider scaling back
the scope of investing and possibly
look at outsourcing.

Eyeing Asian and

emerging markets

SELF-AWARENESS

They come with both opportunities and risks, but key factors for investors to note are Chinese
policy, clarity on US Fed moves and the greenbacks strength. BY SEAN TAYLOR

HE final quarter
of last year witnessed another
bout of underperformance
in
Asian and emerging equity markets versus global markets. Part of this was due to
the strength in the US dollar and the
impact of the fall in the oil price on oil
producing emerging market countries.
As we expected, Asia ex-Japan outperformed Latin America and Eastern
Europe, and Japan unhedged. Although Asia ex-Japan ended up flat in
US dollar terms, there were good returns made in a few of our favourite
markets, namely India, Indonesia and
the Philippines. These returns were
offset by negative returns in Japan unhedged, South Korea and Malaysia.
What last year highlighted again is
that country selection matters in
Asian and emerging markets investing. One of the main reasons for this
is that those countries who have reform agendas are seeing higher returns than those who dont.
One of the key questions that
Asian and emerging market investors
are asking themselves is when is the
underperformance going to stop versus global markets. This underperformance started in October 2010
and has been largely a result of a slowdown in GDP growth, which has led to
earnings downgrades and a fall in return on equity.
Our view is that it is unlikely that
the underperformance is going to be

reversed initially this year. The continuing risk of Fed normalisation, further US dollar strength combined
with the impact of the fall of oil prices
and the medium term headwinds facing China, and lack of an Asian export
growth pick up leave the risks too
high to upgrade the asset class in the
first part of the year.
So we remain neutral versus global
equities. Within the Asian region, we
continue to be positive on India, the
Philippines and China, and still finding less opportunities in South Korea
and Taiwan, and are less positive on
Japan, Australia and Singapore. Within emerging markets, our preference
is still for Asia over Latin America,
and Europe, the Middle East and Africa (EMEA) on stronger fundamentals.
Although we do think that at some
point, the underperformance in the
non-Asian areas will provide an opportunity to increase exposure at
some stage later in the year.
The medium term investment
case for India is still reasonably clear.
Prime Minister Narendra Modi is laying down the foundations for a broad
investment recovery.
The three key reforms are the land
acquisition law, labour reform, and
the introduction of a national goods
and services tax. Although there is no
sign at the moment that a revival is
happening, the economy appears to
have bottomed and project approvals
have increased.
At the same time, the Reserve
Bank of India is expected to continue
to cut rates as inflation falls, which
should lead to lower lending rates
and a pick up in credit growth to help

Mr Taylor: What last year

highlighted again is that country
selection matters in Asian and
emerging markets investing.
fuel economic growth. This is very
positive and makes us constructive
on both Indian bonds and equities in
the medium term. Although most
emerging market and Asian funds are
overweight India in their portfolios,
there is huge potential for a number
of years of double digit gains driven
by earnings recovery as the investment recovery takes place.
The buy case for China is trickier.
The economy clearly slowed in 2014,
and at certain times showed periods
of stress in the property sector which
is so crucial to overall growth. Howev-

er we are more positive that the government will continue to relax policy
to slow down the decline in the economy which should be positive for the
stock markets. The Peoples Bank of
Chinas rate cut in November was followed by increased confidence by local investors as witnessed in a sharp
A-share rally. Fuelled by a huge increase in margin lending, this is leading to more interest in the H-share
market. With a number of rate cuts
and the lowering of the reserve-requirement ratio expected to combat
weaker growth, we remain constructive on interest rate sensitives on a
tactical basis. Medium term, the best
Chinese growth story remains in the
Internet area. We are still wary of
large cap state-owned enterprises.
Finally the Philippines remains, in
our view, the best structural investment story in the smaller markets.
Strong growth from the business process outsourcing sector and increasing remittances from overseas workers, supported by increased government investment going into a presidential election cycle should lead to
another year of positive returns, and
justifying its premium valuation.
So what do we need to upgrade
Asia and emerging markets? A numbers of factors are key here. Chinese
policy leading to a growth pick up in
the second half of the year, more clarity on Fed policy, less US dollar
strength, and most importantly a reversal of earnings downgrades across
the asset class.
The writer is regional investment
head APAC, head of emerging
markets at Deutsche Asset & Wealth
Management

FOs are not immune to behavioural biases in investing, which can be further compounded by the long shadow of one or more influential family
members. One fairly common FO behaviour is optimism bias the mistaken belief that success in one endeavour objectively translates to other areas of life (and investing). FOs serve individuals who have experienced a significant measure of success in life,
and such optimism may cloud investment decision-making. The objective
is to identify and comprehend the
role bias plays in investing. Ideally,
such awareness fosters a culture of
self-awareness and healthy challenging of ideas by investment staff and
key family members.

ADVICE
The complexity of contemporary investing demands the use of both internal and external resources. This is particularly true of FOs that allocate capital to multiple asset classes, diverse
geographies, or a large number of
managers. In a desire to maintain confidentiality or avoid the onslaught of
sales inquiries, FOs may shun all but
a few key relationships. Such insular
behaviour may unwittingly promote
group-think and needlessly limit access to investment ideas, technology
or useful advisers. Resources available to FOs come in many forms; private banks can provide access to useful investment research and offer access to powerful portfolio and risk analytics. Some are able to manage assets on a discretionary or advisory basis. A good initial step in opening up
access to external resources is to determine where you may have information gaps or limited investment technology. The objective is the judicious
use of third-party resources that allows FOs to gather a wide range of investment input, which can better inform investment decision-making,
risk management and financial reporting.

Mr Salem: Resources available to

FOs come in many forms; private
banks can provide access to useful
investment research and offer
access to powerful portfolio and
risk analytics.

OVER-ALLOCATION
FOs often find themselves over-allocated to a range of funds and fund
types in an effort to achieve portfolio
diversification. It is not uncommon to
observe similar dollar investments in
multiple managers, each of whom invests in broadly similar vintages,
strategies and sectors, and often,
have strong, positive correlations.
One effect of over-allocation is to increase Beta exposure and diminish
the impact that any one managers Alpha contribution will have on performance. The result is often average
or sub-par returns. FOs should aim
for a well-researched thesis, backed
up by sound manager screening, research and ongoing due diligence.

LIQUIDITY MANAGEMENT
The first rule of FO investing is to always ensure you have sufficient portfolio liquidity. Unlike the predictable
flows of foundations and endowments (which often serve as the model of institutional investing), families
can be idiosyncratic and unpredictable when it comes to cash flow. A new
home or aircraft, an unforeseen and
compelling investment opportunity,
or a severe market correction may
precipitate the need for sudden, unexpected liquidity. Illiquidity risk
should be discussed with the family
in order to explicitly identify their expectations. The objective is to prepare a thoughtful family cash flow
budget where possible; and consider
having a credit facility in place that
can easily (and inexpensively) be accessed if the family office needs to
bridge liquidity gaps.
Being able to recognise many of
these challenges within the FO is the
foundation for continued improvement in both process, as well as investment, outcomes. In addition, collaboration with those with proven
success, be it another FO or an established financial institution, can offer
great value in the way of insight and
assistance.
The writer is chief executive officer,
Citi Private Bank, Asia Pacific

What investors should know about risk-based investment products

By Neo Teng Hwee
IN THE world of investments, risk is often
characterised as undesirable but necessary in
the pursuit of higher returns. But history has
shown us that this investing principle does
not always hold true.
The 1997 Asian financial crisis was a watershed for investors who believed that pursuing
higher risk would lead to greater returns. Following the crisis, equity investors were faced
with two decades of poor and volatile returns
while fixed income investors generated better
returns with lower risk. This has led to the rise
of investment solutions that are oriented towards managing risk while generating more
stable returns.
In todays environment where the appetite
for risk can be conservative, we will explain
three risk-driven investment concepts that investors need to be aware of and the potential
pitfalls.

I. VOLATILITY ANOMALY
The benchmark Capital Asset Pricing Model
(CAPM) suggests that expected returns are proportional to market risk. For example, to earn
a higher return, one needs to undertake more
risk and vice versa. While the theory is intuitive and elegant, empirical data from 1928 to
2003 has consistently pointed to the contrary: less volatile stocks delivered better risk-adjusted returns than more volatile stocks. This
phenomenon has been shown by various academic studies to be robust across different

One reason why volatility target strategies have done so

well is that they exploit the leverage effect where asset
prices have been observed to fall in rising volatility and vice
versa. However, investors need to be aware of the specific
conditions required for the strategy to be successful.
time periods and geographies using various
definitions of risk.
This phenomenon has also given rise to
various investment products attempting to
take advantage of this volatility anomaly,
such as exchange traded funds. How does one
explain the counterfactual outcome? A credible argument is leverage aversion theory,
which argues that investors who are unable to
leverage due to various constraints have to
buy riskier stocks to raise the risk exposure of
their portfolios. As a result, riskier stocks
tend to be overvalued and deliver mediocre
performance over time. Low volatility also
helps in compounding returns over time by reducing impairment to long-term wealth.
However, relying on historic data alone to
devise an investment strategy is not the most
useful. This strategy is similar to driving
while only looking in the rear-view mirror.
What is past may not manifest in the future. Investors should also note that low risk stocks
usually cluster around a few sectors and the

resulting portfolio may be poorly diversified.

Importantly, investors need to understand
the anomaly is still fairly immature. Not all
low volatility products are the same and it is
important to determine the underlying sources of returns. While a low volatility portfolio
has its merits, it should not apply across an
investors entire portfolio.

II. VOLATILITY TARGETING

The other concept that has gained some popularity is volatility targeting. This approach involves maintaining constant volatility for a
portfolio. Take a multi-asset portfolio for instance. If the volatility rises for an asset class
within the portfolio such as equities, the exposure to that asset class will be reduced accordingly such that the overall portfolio volatility
is brought back to the preset target. One reason why volatility target strategies have done
so well is that they exploit the leverage effect where asset prices have been observed
to fall in rising volatility and vice versa. How-

ever, investors need to be aware of the specific conditions required for the strategy to be
successful. Moreover, risk and correlations between different asset classes dont usually
stay constant over time and measuring their
changes over time is far from an accurate science so far.

III. Risk Parity

The concept of risk parity is to allocate equal
risk to every asset class in a multi-asset portfolio. This could involve using borrowed funds
to buy bonds to attain the risk quota. Risk parity was developed in response to the criticism
that a traditional balanced portfolio has most
of its risk coming from equities. This idea has
intuitive appeal, especially when major financial crises have been associated with massive
draw downs in the equity markets while the
relatively safer bonds outperformed. However, investors need to be aware that the bull
market in bonds has lasted for over three decades. While risk is an important part of portfolio construction, it is dangerous to leverage razor-thin risk premiums in asset classes just
because their past volatility was low.
As in most data analysis, patterns arose
due to specific conditions that prevailed in
the past. It would be foolhardy to extrapolate
past data without understanding underlying
causes and presume they would persist.
The writer is chief investment officer, head
of Investment Products and Solutions, UOB
Private Bank

Mr Neo: Relying on historic data alone to

devise an investment strategy is not the
most useful. This strategy is similar to
driving while only looking in the rear-view
mirror.

The Business Times | Wednesday, February 25, 2015

WHOS WHO IN PRIVATE BANKING | 5

Realising the investment

potential of China firms
While the potential returns are attractive, there are challenges and pitfalls to overcome. BY VICTOR CHOI

HINAS investment potential

since the opening of its economy has enticed
many investors. Its rapid
economic rise
and the emergence of large industrial
and service sectors have created a
wide range of investment opportunities and instruments. While the potential returns are attractive, there are
challenges and pitfalls to overcome.
Two experts and I examine the different ways to invest in Chinese companies.
Chinas growth must be seen in
the context of its expanding role in
the world economy. This means that
investors shouldnt only focus on
growth numbers. They need to look
closely at the characteristics of each
company or opportunity within overall trends, says Ayaz Ebrahim, CIO
Asia ex-Japan equities and deputy
chief executive officer of Amundi
Hong Kong.
He adds: Continuation of economic opening and liberalisation is a key
trend allowing the entry and expansion of foreign banks. QFII (Qualified
Foreign Institutional Investor), RQFII
(Renminbi Qualified Foreign Institutional Investor) and Shanghai-Hong
Kong Connect are policy commitments towards a controlled opening
of China.
Premier Xi Jinping has executed

many reforms, the most prominent

being anti-corruption drives. He has
also raised civil service pay by 60 per
cent. This is an effective way to fight
corruption. Interest rate liberalisation
(in lending, not deposits) is a big step
forward towards a free market economy. In a command economy, controlled lending rates are an inefficient
way to allocate capital and price risk.
Olivier Carcy, global head of private equity at Credit Agricole Private
Banking, says: The opening of the
China market is a controlled and long
process. He manages global private
equity portfolios, which represent unlisted investments. He believes that
private equity is slowly opening up.
In the US, private equity represents
2.5 per cent of GDP and in China 0.35
per cent. Privatisation of state owned
companies remains a big opportunity.
Mr Ebrahim highlights one of the
biggest problems facing investors in
Chinese corporations. Corporate governance issues continue to be a problem in China. On corporate governance rankings, China is still not on the
same level as the US and Europe. One
reason is that retail investors, who
dominate Chinese markets, have not
demanded major regulatory changes.
But as more foreign investors participate, this bias will change.
Recent data suggests that Chinas
economic growth is slowing down. After years of high growth, investors
need to understand the positive and

Mr Choi: Investors need to think

about other risk factors that are
unique to China.

Chinas rapid economic rise and the emergence of large industrial and service sectors have created a wide
range of investment opportunities and instruments. PHOTO: REUTERS
negative outcomes of moderating expansion. Mr Carcy observes: For private equity investors, it could be
good news. Private equity is a costly
and intrusive form of capital. Slower
economic growth improves entry valuations for investors. It also encourages companies to venture and expand
overseas and improve cost controls.
It forces an economic rebalancing by
removing excess production capacity. In the past, companies with access
to cheap credit created overcapacity,

which forced down product prices to

irrational levels.
Slower GDP growth and Chinas integration with the international economy might improve management quality. Mr Ebrahim advises: If investors
focus on companies with the ability to
rationally price and operate, they can
make superior, long term returns."
However, Mr Carcy believes there
is still a long way to go for Chinese corporations to evolve into world class
organisations, especially in terms of

middle management quality. However, private equity investors face

unique due diligence challenges. Mr
Carcy points out: Basically, we need
full access to all of the companys financial statements. If not, we cannot
proceed with an investment.
In listed equities, we favour private sector Chinese companies. For
the fixed income class, we seek state
owned companies for their stable
yield. Diversification is the key to
building a fixed income portfolio.

Mr Ebrahim recommends investing through H shares rather than A

share markets. In China, mutual fund
flows are driven by retail rather than
by pension funds and institutional investors. So they are more volatile. He
currently favours sectors such as consumer discretionary products, automobile parts, travel, local luxury
goods, alcohol, local brands and insurance companies. China valuations
are below their 10-year average so we
are optimistic about their growth
prospects.
Investors need to think about other risk factors that are unique to China. The overall political risk of the latest anti-corruption drive could impact the rule of law. Mr Ebrahim cites
other challenges such as the inability
of the Chinese government to rebalance the economy and prevent widespread unemployment due to closure
of the RMB capital account. But, there
is upside in 2015 as analysts may not
have priced the fall in oil prices into
the output of mainland companies.
The writer is head of markets &
investment solutions in Asia, Credit
Agricole Private Banking

Diversifying effectively in a divergent market

Mr Ang: An added advantage of

investment mandates is that it helps
investors to overcome home bias, the
common disposition of investors to stick to
their home markets.

By Raymond Ang
IN THIS diverging world with increased volatility, investing in the current market environment is increasingly challenging. In addition
to geopolitical tensions and falling oil prices,
2014 also saw divergence in central bank policies. Predictions are that 2015 will continue to
see uneven economic growth and varying approaches to government policymaking.
In such an uncertain economic environment, it is more crucial than ever for investors
to recognise the importance of diversifying,
rebalancing and managing risk to get an appropriate balance between risk and return on
their portfolio in line with their long-term financial goals.
So what should investors be looking at in
this divergent market?
Diversification is the key. We believe investors holding a well-diversified portfolio of equities, bonds, and alternatives, stand the best
chance of navigating the diverging world successfully, with comparable low levels of vola-

tility. In general, the US dollar and eurozone

equities are noted to be strong while investment grade corporate bonds offer a yield
pick-up. Investors should, however, still be
cautious about strategic commodity positions, given the high price volatility. While we
expect oil prices to recover in the second half
of the year, the near term outlook remains uncertain.
Diversifying assets is not an easy task, given the growing complexities of todays marketplace. So how can investors be successful
in attaining a well-balanced portfolio? One
first needs to make sense of vast amounts of
data, monitor thousands of financial instruments, build a well-diversified portfolio, supervise it constantly, and be able to react
swiftly and effectively. This is not easy in
todays rapidly changing environment.
A popular solution for investors remains
the core-satellite approach one that splits investments into two parts: a core portfolio of
over 70 per cent tailored to their long term

needs, combined with satellite investments of

less than 30 per cent that allows them to take
advantage of market opportunities. With this
core-satellite approach, the challenge is getting the optimal mix of investments. This is
not easy as it would require investors to constantly monitor markets and understand the
implications of market movements. Investors
are, thus, choosing to outsource and automate core portfolio investments via investment mandates, which delegates the analysis
and day-to-day investment decisions to a financial partner.
An added advantage of investment mandates is that it helps investors to overcome
home bias, the common disposition of investors to stick to their home markets, most usually in stocks which they are familiar with. Investment mandates also help to take the emotion out of investing, reducing performance
volatility in the long term.
It is important, however, that investment
mandates need to be shaped by market in-

sights based on extensive analysis, research,

instrument selection and risk management.
One such tool is the UBS House View, an integrated and systematic process that brings together the global research and insights of a
network of 900 analysts, economists and strategists with a strong local presence in each
market, in consultation with external fund
houses, and screens 60,000 investment vehicles on an ongoing basis.
In this uncertain economic environment,
investors need to have a partner that has eyes
and ears on the ground to help them tweak
their portfolio. This helps investors to diversity effectively, protecting and growing their
wealth in the long run.
With increased risks come increased opportunities, and investors can rely on strong
financial partners to seize investment opportunities that lie ahead in 2015.
The writer is regional market manager,
Singapore, and managing director, UBS Wealth
Management at UBS Singapore

Global trends to influence Asian financial assets

Lower oil prices are more driven by abundant supply than restraint in
demand and the most visible positive demand shock will be felt in the
US, as consumers will be able to spend more, however Asian countries
with positive net oil imports will also benefit. PHOTO: AFP

By Didier Duret
THERE are two global phenomena
that we believe will influence the behaviour of Asian financial assets: central bank actions and low oil prices.
Monetary policy adjustments could
create moderate volatility for Asian
fixed-income assets and currencies,
while low oil prices will support Asian
equities. Asian equities are also attractive given the variety of local economic and political conditions, which are
constructive for effective diversification.
In 2015, central banks have regained their power to surprise. This is
in contrast to 2014, when central
banks main duty was to provide visibility and guidance on the course of
monetary policy. They were keen to
avoid surprises, keen to increase the
confidence in the financial sphere
and be observably constructive for
the global recovery that was just underway.
In terms of unexpected central
bank actions, 2015 has already seen
the European Central Bank beginning
a one trillion euro (S$1.55 trillion)
open-ended asset purchase programme designed to counter the deflationary forces in the eurozone that
was unimaginable a year ago. A few
days earlier, the Swiss National Bank
had stunned markets by lifting its
floor to allow the Swiss franc to float
freely, which is a return to its traditional independence. The next possible surprise might be the US Federal
Reserve finally lifting its official rates,
currently at 0.25 per cent, an increasingly awkward level as the unemployment rate drifts under the 5 per cent

mark. The Federal Reserve may move

in the course of the second quarter of
2015, but the timing and pace of its future hikes remain uncertain. The expected negative impact on Asian currencies should be limited, as the US
dollar has already rallied, well in advance of any hike. Against conventional wisdom, the volatility of most
Asian currencies is much lower than
euro volatility. The lower local inflation in Asian countries also gives central banks a margin and the ability to
support their economies with accommodative monetary policies. We believe the strong US dollar will only
translate into a mild weakness in
Asian currencies with no Asia currency crisis expected and that the volatility created by expectations of higher
US rates may raise opportunities to
buy selected corporate bond names.
A prolonged period of lower energy prices will bring more opportunities than threats, and this should benefit both Asian economies and stock
markets. Asian equities are overweight in our global asset allocation
for the banks private clients and our
favourite markets are China and India, with diversification in Hong
Kong, Japan, Indonesia, Taiwan and
Singapore.
Lower oil prices are more driven
by abundant supply than restraint in
demand and the most visible positive
demand shock will be felt in the US,
as consumers (70 per cent of the economy) will be able to spend more, however Asian countries with positive net
oil imports will also benefit. External
demand stemming from the US and
EU will also support exports from
Asia. Lower oil prices will also trans-

Mr Duret: Out of necessity,

institutional and private investors
are progressively moving away
from a pure domestic investment
base.
late into lower export prices for the
US, Europe, Thailand and Singapore
and, to a lesser extent, Australia and
India, as well as allow governments,
such as India and Indonesia, to pursue market reforms such as cutting fuel subsidies. This leads us to have
higher-than-consensus 2015 growth
forecasts and expect that world economic growth will reach 3.8 per cent,
and emerging markets ex-Asia to see
growth of 6 per cent.
Higher world trade and improved
trade regionally in Asia can compen-

sate for the slower pace of growth expected in China, although lower energy prices will also support the transition towards a more domestic Chinese economy, going hand in hand
with the goals of policymakers. Increasing trade will also translate into
higher earnings growth for regional
firms in the consumer, IT and industrial sectors. Investing in Asia, however, requires discipline in diversification, and should include emerging
market corporate bonds, such as
those of the best Chinese energy companies.
Asia equity valuations, as measured by the price/earnings ratio
with expected earnings for 2015 in
countries such as China, Singapore,
Indonesia and Thailand are of a similar magnitude equivalent to Europe
(12 times), respectively at 11.1, 12.5,
12.7 and 12.2 and still far below the
US (14.5) or Japanese (16.5) markets.
The world recovery is paved with
macroeconomic risks, such as deflation in Europe, as well as more uncomfortable risks, such as renewed geopolitical tension between the West and
Russia. If new tensions should occur,
Asia will benefit from flows looking
for safe havens. Out of necessity, institutional and private investors are
progressively moving away from a
pure domestic investment base. Investing in Asian assets can be used as
insurance for investors looking for international diversification and Asia investors should be advised to diversify across the region to diffuse the volatility that will continue to be the
dark side of the strong trends that are
underway.
The writer is chief investment
officer, ABN Amro Private Banking

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

Rising Above Volatility

Diversification. This is the key advice that ABN Amro Private Banking
will give to its clients, as markets face greater volatility this year.
Didier Duret
Chief Investment Officer,
ABN AMRO Private Banking
Rule number one is to be more diversified than usual,
because of the cross currents that we have, and the sudden
bouts of volatility from time to time, says chief investment
officer Didier Duret.
The plunge in oil prices since June last year has created
uncertainty in both the economy and equity market. This,
however, should not be seen as a threat but an opportunity
to enter the market, he added.
Mr Duret is optimistic on the global economy. Talk of
quantitative easing has overshadowed real movements in
the economy for the past year, but this would change in 2015.
The big thing last year was about the relationship between
policy and economy. This year policy would remain
important, but the big thing will be the influence of key
variables such as oil price, low bond yields and the US
dollar on the real economy, he says.

In his view, the twin factors of lower bond yields and oil prices
will gradually produce positive effects for the global economy,
and by extension, the equity market.
We have not taken the full measure of what it is, we will
discover that along the way, he says. Lower bond yields
would reduce borrowing costs for companies, and weaker
oil prices would immediately boost the spending power for
consumers, with the latter having a more direct impact on
consumer spending than the US quantitative easing.
Lower oil price goes straight into the pockets of people,
without going through the credit channels.

MARKET OUTLOOK
The bank is overweight on equities, particularly on the
European and Asian emerging markets, as accelerated
economic growth, lower energy prices and a strengthening US

dollar would support earnings.

Within Asia, Mr Duret is favourable towards the equity markets
in China, India and Indonesia. In the latter two countries, the
reduction of fuel subsidies are encouraging signs of the
governments determination at making reforms.
In bonds, investment opportunities have shrunk with lower
yields. Mr Duret encourages investors to be super selective
in this asset class, pointing to opportunities in European
high-yield bonds and Asian corporate bonds.
He is also bullish on Asia emerging market currencies, which
are better placed for the expected increase in US interest rates
this year, as compared to the taper tantrum of May 2013
when they were hit by large sell-offs upon talk of a tightening
in the US monetary policy. Some currencies, such as
Singdollar, have emerged as safe haven assets, rising after the
conflict between Russia and Ukraine erupted.

Clients today like to invest not just in Asia but internationally. For this reason having
global scale and geographic reach to support clients who are looking for such diversity
of asset allocation is necessary for private banks in Asia.
COMPETITIVE EDGE
It is on one such aspect of specialists expertise
of the global economy and markets that ABN
Amro is banking on to draw high net worth
individuals. The bank provides a full range of
banking, financial & estate planning and
investment services.
ABN Amro Private Banking is the leading private
bank in the Netherlands, and also counts among
the top three private banks in countries such as
France and Germany. The bank also ranks
among the top seven in Europe and top fifteen
in Asia.
In its unique European network of strong local
private banks, it offers clients all the advantages
of a modern global bank underpinned by the
values of a traditional private bank.

Hans Hanegraaf
Haneggraaff
CEO,
ABN AMRO Private
Priva
ate Banking,
Bannking,
Asia & Middle East
Ea
ast

We have deep roots in Europe which include

ABN AMRO MeesPierson, Bethmann Bank
(Germany) and Neuflize OBC (France). Clients
today like to invest not just in Asia but
internationally. For this reason having global scale and geographic reach to support clients
who are looking for such diversity of asset allocation is necessary for private banks in Asia.,
says its Singapore based CEO for Asia & Middle East, Hans Hanegraaf, noting that Asian
clients today have shown a preference to invest and diversify their portfolio to include assets
in Europe, for example.
In Singapore, while competition in the private banking market remains stiff, ABN AMRO is
confident that its depth of knowledge, global expertise, commitment to the private banking
business and track record having been in Asia since the 1800s will distinguish the bank
from others. With its combination of centuries-old heritage, open architecture product
platform, local understanding and dedicated client service teams, clients see the bank as a
trusted advisor.
Client contact and a sustainable long term relationship is at the heart of ABN AMRO Private
Banking. We regularly evaluate the services effectiveness and our relationships with the
client, then fine-tune as necessary, says Mr Hanegraaf.

ABN AMRO Bank N.V

Level 25, One Raffles Quay
South Tower
Singapore 048583

Tel: +65 6597 8866

Fax: +65 6597 8822
www.abnamroprivatebanking.com

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

Access To One-Stop Banking

Services With Bank of Singapore
If you are a high net worth individual with a successful
business, chances are you need an advisor who can
structure your private investments, help manage your
wealth, put together your estate plan, direct your
charitable giving, help open a deposit account and even
provide a mortgage for the London property you plan to
acquire as a home for your child studying there. At the
same time, your business needs access to financing for
capital or trade, currency hedging or advice on IPO listing
among other corporate banking services, as it expands
globally.
It would make sense to partner a private bank that can
offer seamless end-to-end solutions that meet all these
needs.
As the dedicated private banking subsidiary of OCBC
Bank, Bank of Singapore is in the unique position of being
able to help our clients manage their finances holistically,
leveraging on our knowledge of our clients business and
personal needs to offer relevant financial solutions.

Partnering Asias Global

Private Bank
Bank of Singapores Aa1 rating from Moodys has proven
to be a strong attraction for high net worth individuals
looking to include Asia as a key component of their wealth
diversification strategy.
With our international private banking capabilities and
comprehensive product platform, we are able to source
the best financial solutions for our clients. This includes
products from any part of the world, not just Asia. Given the
increasingly borderless nature of investment opportunities
and the fact that high net worth individuals usually have
multi-jurisdictional investment goals, this ability to tap into
global opportunities makes a world of difference.
Because Bank of Singapores product offering is not
limited to what is available in-house, our clients not only
have access to more choices but also to better quality.
We scrutinise financial products objectively even those
from member companies of the OCBC group before
recommending the best that fit our clients investment
profiles.
We can do this because we have one of the largest
in-house product and research teams in Asia, comprising
160 analysts and specialists, acting in full independence in
the interest of the client. Our strong research capabilities
ensure that clients have the information to make the right
investment decisions in fixed income, equities, foreign
exchange, funds and hedge funds as well as portfolio
management, trust and insurance services.
Over the past five years, Bank of Singapore has seen
strong business growth in the face of continued pressures
on the private banking business which include higher
regulatory costs, competition for talent and higher client
expectations.
To meet these challenges, one of the areas we have
invested in is the automation of key processes to improve
customer service and experience, reduce cost and

increase productivity. More efficient processes have

enabled our relationship managers to spend more time
providing advisory services to our clients.
As private banking is a very relationship-driven business,
we are very mindful that our priority should still be focused
on personal and regular interaction with our clients, to help
them understand the investment environment and make
the right investment decisions.

Providing Comprehensive
Commercial Banking
Services Through Parent
Company, OCBC Bank
Being part of the OCBC family has its benefits. Bank of
Singapore clients enjoy convenient access to the broad
array of commercial banking, specialist financial and
wealth management services of the OCBC group, ranging
from consumer, corporate, investment and transaction
banking to treasury, insurance, asset management and
stockbroking services.

BAHREN SHAARI
CEO

Clients who require banking services across markets can

tap on OCBC Banks network of over 630 branches and
representative offices in 18 countries and territories,
including its key markets in Singapore, Malaysia, Indonesia
and Greater China.
These include more than 330
branches and offices in Indonesia operated by subsidiary
Bank OCBC NISP and 95 branches and offices in Hong
Kong, China and Macau, under OCBC Wing Hang.
Recognised for its financial strength and stability, OCBC
Bank is consistently ranked among the worlds strongest
and safest banks by leading market research firms and
publications.
With our international private banking capabilities and
comprehensive product platform as well as our strong
parentage and access to universal banking services
through OCBC Bank, Bank of Singapore is well-positioned
to be your global private bank in Asia.

Care for Clients

While it is important to offer a comprehensive product
platform, care for clients and helping them to manage
risks is a key priority at Bank of Singapore. A good banker
is one who pulls back the client when the going is good
because that is when people tend to be exuberant and
act excessively. And in a crisis, when the markets are
cratering, a banker has to be grounded and not add to
the clients fears, shared Bank of Singapores Chief
Executive Officer, Mr Bahren Shaari.
Mr Shaari added that bankers and their clients should be
able to communicate honestly when asked the question,
Would you be prepared to hold on to the investments in
your portfolio today?
Risk management should be your number one priority.
Investment returns are only number two, he concluded.

BANK OF SINGAPORE LIMITED

63 Market Street #22-00 Bank Of Singapore Centre, Singapore 048942 T: +65 6559 8000 F: +65 6559 8180
www.bankofsingapore.com

A good banker
is one who pulls
back the client
when the going is
good because that
is when people tend
to be exuberant
and act excessively.
And in a crisis, when
the markets are
cratering, a banker
has to be grounded
and not add to
the clients fears.

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

A deeply personal approach

At the heart of BSIs client promise is our commitment to a
tailored, bespoke service and nothing can be more personal than
helping a client prepare for retirement and even for death. It
may sound trite but these plans must reflect the things most
important to any person hopes, dreams, loves and fears.
Hanspeter Brunner

Chief Executive Officer of BSI Asia

Understanding wants and needs

In just a few short years in Asia, BSI Bank has built the kind of customer
relationships which have characterised its private banking service in
Europe since it was founded in 1873.
For BSI Asia CEO Hanspeter Brunner, nothing reflects this more
strongly than the deeply personal conversations the banks
relationship managers now have with their clients.
He explains, Increasingly in Asia, we are talking to clients about the
financial realities linked to both their longevity and their mortality. The
private banking business has always been about establishing
relationships, but when it comes to wealth planning for retirement and
estate, those relationships must be more akin to genuine friendships.
Mr. Brunner says it is about understanding what clients want but, quite
often, its about telling them that their wants and their needs may
not be the same. It is an enormous responsibility and one we take
very seriously.

A new generation of clients

The history and traditions of private banking in Europe have often
been about the bank carrying the trust of a family from generation to
generation. In Asia, however, much of the wealth is first and second
generation so for many of the regions high net worth individuals
(HNWIs) and their families, detailed succession planning has never
been an issue and certainly rarely discussed with a third party, says
Mr. Brunner.
He adds, It is essential to recognise that all clients are different, all
families are different. Add to this the changes over the last decade or
so in regulations, tax structures, and financial markets and it is clear
that there is no place for a plug-and-play wealth planning approach.
BSIs nimble structure in Asia has also allowed it to introduce the same
kind of customised services and solutions to external asset managers
(EAMs) in the region that it has long been doing in Europe thereby
providing further tailored options in managing client portfolios.

Smaller banks dont have the

brand visibility that will get many
new clients simply knocking
on the door. We rely on referrals
and without the depth of relationship
and absolute trust of existing clients,
we wouldnt get those.
Raj Sriram
Deputy CEO
BSI Asia

Defining boutique
With a staff of around 300 in the region, BSI is understandably
classified by the financial sector as a boutique bank although for
Deputy CEO Raj Sriram boutique is not about size, its about an
absolute focus on the kind of relationships inherent to traditional
private banking.
Mr. Sriram says BSI clients are increasingly recognising the importance
of tailored advice over a transactional broker relationship and this is
reflected in the fact that more than 90 per cent of all BSI Asias new
business is secured through referrals.
Interestingly, according to PWC research, 75% of Asian clients have
relationships with three or more banks, compared with 37% globally
but, he observes, While theres no argument against spreading risk
within a portfolio, the current Asian tendency to spread it across
multiple banks is unnecessarily complicated.
A future win-win, he believes, must be based on deeper relationships
and greater trust on Asian clients growing acceptance of and
comfort with the roots and traditions of private banking.
Says Mr. Brunner A boutique private bank like BSI has a unique
advantage in this respect because we have a flexibility not found within
larger financial institutions. Ours is a lean decision-making hierarchy,
able to respond quickly to opportunities and to issues affecting
clients.

10

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

11

The Credit Agricole groups presence in

Singapore dates back more than 110 years
through Banque de l'Indochine demonstrating
the banks stability and regional expertise.
Thanks to our deep rooted presence and our
firm commitment to the region, we gained a
strong understanding of our Asian clients
specific needs, be it in investment solutions,
wealth structuring or specific financing.
Hans Diederen
Head of Asia Region
Crdit Agricole Private Banking

Our bank is characterised by culturally diverse

teams with a strong entrepreneurial spirit,
committed to deliver a personalised and
bespoke service to each client.

Sen Sui
Head of Singapore Branch
Crdit Agricole Private Banking

ABOUT CRDIT AGROICOLE PRIVATE BANKING

Backed by Crdit Agricole, one of the soundest financial group in the world with more than USD 85 billion of shareholders equity,
USD 248 billion of liquidity reserves and a total of assets of USD 1,965 billion,
billion we bring the best of different worlds to our clients:
- A global private banking network with multi-booking capabilities around the globe,
- A flexible and human sized house able to adapt to specific requirements such as financing needs and credit facilities,
- A regional specific expertise acquired through decades of presence and a strong advisory team specialised in each asset class.
OUR MACROECONOMY OUTLOOK 2015 TRANSFLATION: A Deflationary Expansion
By Dr. Marie Owens Thomsen, Chief Economist
The world economy is experiencing a rare event: a deflationary expansion. In our last outlook we described a macro-economic
scenario characterised by modest growth, low interest rates, low inflation, loose monetary policies, and a heightened importance
of the political environment. This scenario would have remained largely intact were it not for the current big game changer: the
large and largely unexpected drop in the price of oil. Lower oil prices, assuming they remain at the new level for some time,
constitute a formidable boost to disposable incomes for consumers everywhere and for oil-importing nations in particular. Oil
exporters look certain to suffer, on the other hand. The net impact on the global economy is likely to be unambiguously positive
and allow the return of the deflationary expansion. This state has been rare since the 1800s; so rare, in fact, that it does not have
a name of its own. We call it TRANSFLATION.
OUR LATEST EXCLUSIVE EVENT IN ASIA WEALTH & BEYOND ASIA SUMMIT 2015
Hong Kong 28 30 January, Four Seasons Hotel
Crdit Agricole Private Banking has developed a series of worldwide
seminars organised around the concept of Wealth Management which
reflects the banks willingness to position itself as a wealth manager open
to the world, able to address all aspects of its clientele wealth, and more.
Throughout the two days, internationally renowned guest speakers
together with the banks experts explored the meaning of wealth through
its different facets and shared their vision on geopolitics,
macroeconomics, financial markets, and beyond that, brought in-depth
information on inspiring and topical trends.
Taking place in Hong Kong, this seminar also focused on perspectives
and social development of China.

12

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

Credit Suisse has been part of the Asia Pacific landscape since
1969. It is one of the worlds largest wealth managers for high
net worth and ultra high net worth clients, and is committed to
anchoring the leading position it enjoys globally in Asia Pacific.
Singapore and Hong Kong are its key hubs in this dynamic and
fast-growing region, while Australia and Japan are also home to
Credit Suisses expanding domestic Private Banking franchises.
Benjamin Cavalli
Managing Director,
Market Area Head Southeast Asia and Head of Singapore Location
Private Banking Asia Pacific

Private Banking and Wealth

Management is a Core Business
Credit Suisse has a track record in Private Banking going
back more than 150 years. Founded in 1856 with
headquarters in Zurich, Switzerland, it operates as an
integrated bank, with its Private Banking and Wealth
Management as well as Investment Banking divisions
combining their strengths.
Credit Suisse is a global leader in Private Banking and
Wealth Management, serving 2.2 million private,
corporate and institutional clients around the world and
managing CHF 1.38 trillion of assets.
Credit Suisse is one of the very few banks with Private
Banking and Wealth Management as its core business in
an integrated bank model. More than 50 per cent of its
employees work for its global Private Banking and Wealth
Management business which delivered half of the firms
aggregate net revenues last year.

Net revenues
Private Banking &
Wealth Management
50%
2014

Industry Leading Advisory Process

Credit Suisse has an industry-leading, needs-based
advisory process tailored to clients needs. The bank aims
to help clients preserve and grow their wealth over
multiple economic cycles.
Its consultative approach is based on a comprehensive
understanding of each clients overall financial situation.
The bank believes that the integration of multi-disciplinary
advice with investment strategy is critical to helping
clients achieve their wealth management goals.
Credit Suisse is committed to providing its clients with
comprehensive and integrated wealth management advice.
The breadth and depth of Credit Suisses Private Banking
research is a key differentiator. Its clients benefit from its
extensive market-leading research in the following areas:
Equities: Research on over 3,000 stocks globally
Fixed Income: In-depth research on investment-grade,
emerging markets and high-yield credits across the globe
Foreign Exchange: Research on all major currencies
Real Estate: Comprehensive research coverage on
commercial and residential real estate globally
Alternative Investments: Wide research coverage
of hedge funds, private equity and commodities
including precious metals, energy and soft commodities
Credit Suisse has a truly open product architecture that
provides clients with premium investment solutions. It
works with over 170 different third party product providers
that undergo a thorough due diligence process to ensure
the bank provides best-in-class products and solutions for
clients. In the area of Investment Funds, Credit Suisse
globally has 9,000 total investment fund offerings, with 98

per cent being third party funds.

A Global Integrated Bank

A key competitive advantage of Credit Suisse is its ability
to bring all the resources of the bank together for its
clients. Credit Suisses integrated banking strategy
combines its key strengths in Private Banking and Wealth
Management with its leading capabilities in equities,
fixed income, corporate finance and asset management.
Across boundaries and divisions, it delivers a compelling
proposition for clients looking to access a full spectrum of
its best products and capabilities to help them expand
their businesses, as well as protect and grow wealth.
Credit Suisses solutions specialists add an extra
dimension to its service, especially for ultra high net
worth clients who have substantial assets and complex
requirements. With its integrated bank model, it is able to
harness the expertise from Private Banking and Wealth
Management alongside that from Investment Banking, to
advise clients on the solutions the bank can provide.
Credit Suisses Ultra High Net Worth Solutions team
provides sophisticated solutions for ultra high net
worth Private Banking clients by leveraging the full
integrated capabilities of the Bank.

Best People
Our over 40 years of commitment and dedicated service
to our clients in Asia Pacific have given our Relationship
Managers enviable track records and extensive
experience. Our comprehensive training and
development programs ensure that we are able to deliver
the best to our clients and make Credit Suisse one of the
worlds most admired banks.

50%
Investment Banking

Global and Local

As a global bank, Credit Suisse has an extensive
international footprint, with over 300 offices and
branches located in more than 50 countries, and 21
booking centers.
Credit Suisse has been part of the Asia Pacific landscape
since 1969. It is one of the worlds largest wealth
managers for high net worth and ultra high net worth
clients, and is committed to anchoring the leading
position it enjoys globally in Asia Pacific. Singapore and
Hong Kong are its key hubs in this dynamic and
fast-growing region, while Australia and Japan are also
home to Credit Suisses expanding domestic Private
Banking franchises.

Managing Wealth through the various life stages with Credit Suisse solutions and services

The Business Times, Wednesday, February 25, 2015

WHOS WHO IN PRIVATE BANKING

13

14

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

Enjoying steady growth in Asia

In Asia, EFG Bank has built up assets under management of
CHF 16 billion in 15 years, or about CHF 1 billion a year
EFG Bank, a member of EFG Internationals
global family of private banking businesses,
celebrates its 15th year in Asia and Singapore
this year. It has come a long way in a
relatively short space of time, building up
assets under management (AUM) in Asia to
CHF 16 billion in 15 years, or averaging about
CHF 1 billion a year.
In Singapore, we are committed to
delivering strong, profitable growth, says
Kong Eng Huat, CEO of EFG Bank Singapore
Branch and Southeast Asia.
He says growth will be achieved mainly by
organic means. This includes the recruitment
of senior bankers called Client Relationship
Officers (CROs) and helping existing ones
broaden and deepen their client base.
The bank will continue to build on its
success by keeping its entrepreneurial
model, enhancing its capabilities, and
providing clients with the best possible
service and advice, he says.

Growth in AUM is absolutely critical in an

environment
where
margins
remain
compressed, interest rates remain low and
markets continue to be volatile and difficult
to call.

The banks trust and wealth solutions license

allows it to structure and manage trusts and
to provide fund administration services.
As of mid-2014, EFG Bank in Asia has 110
CROs and AUM of CHF 16 billion.

Established in 2000, EFG Banks Asian

operations were profitable within a year and
have consistently grown in a disciplined and
sustainable way. Its regional network of offices
encompasses Hong Kong and Singapore,
which are both booking centres. It also has
offices in Shanghai, Taipei and Jakarta.

Mr Kong joined EFG Bank Singapore three

years ago as its CEO, and has since raised the
profile of EFG Bank in Singapore. He has also
strengthened the management team and
recruited a range of senior CROs.

In 2003, EFG Bank Singapore obtained a

merchant banking license from the Monetary
Authority of Singapore.

A private banking veteran with over 36 years

of industry experience, Mr Kong says he was
attracted to EFG because of its entrepreneurial
business model and its commitment to
growth in Singapore and Asia.

This was upgraded to a wholesale banking

license in 2014, enabling the bank to broaden
and deepen its range of services to clients,
including offering Singapore dollar deposits.
EFG Bank also has an asset management
license, allowing the bank to manage
discretionary portfolios and funds.

The banks decentralised management

structure, whereby local managers are
empowered to steer business growth, was
also a strong draw, he says.

In Singapore, we are committed to delivering strong, profitable growth, primarily through organic
means. Growth in AUM is absolutely critical in an environment where margins remain compressed,
interest rates remain low, and markets continue to be volatile and difficult to call.
Kong Eng Huat
CEO for EFG Bank Singapore Branch and Southeast Asia

2015 Investment Outlook and Strategy

In recent years, private banks have found
themselves in a challenging investment
environment.
EFG Bank offers solutions through its
investment platform, EFG Investment
Solutions. The platform is an integral part of
the private bank, and taps on the expertise of
the banks investment professionals in Hong
Kong and Singapore, as well as London,
Geneva, Zurich, and Miami.
Moz Afzal, chief investment officer (CIO) of
EFG Investment Solutions, says 2015 will be
a year of diverging economic activity.
A strong US recovery will drive decent, if not
stellar global growth, he says. However,
Europe and Japan will continue to lag
behind.
Growth in the Organisation for Economic
Co-operation and Development (OECD)
group of countries will be around 2.2 per cent
this year, similar to the year before.
Mr Afzal says that emerging markets, which
had boosted global growth from 2008 to
2012, will have a trickier time.
Commodity exporters in particular will
continue to suffer from lower prices.
However, this will be mitigated by ongoing
reforms taking place in many of the affected
economies, including China, India, Indonesia
and Mexico, he says.
Mr Afzals key picks for 2015 include
Japanese equities, where he sees a
disconnect between overall policy and
economic activity.
Economic reforms announced by Japan
Prime Minister Shinzo Abe, along with a
massive monetary stimulus programme,
should have significant influence over the
year, he says.
It is important to stay vigilant regarding the
yens prospects, as policy action may bring
the yen down further.
Elsewhere in the region, Mr Afzal is eyeing
specific Chinese stocks from among
state-owned enterprises (SOE) that might
reform, coming after major steps like interest
rate liberalisation.

The Chinese governments goal is to turn

SOEs from inefficient asset-centric businesses
into profit-driven industry consolidators. A
handful of SOEs have been identified as role
models, and we believe successful SOE
reform candidates will be the future star
performers in the stock market. This is
especially since most are currently trading at
depressed valuations, Mr Afzal says.
European equities, meanwhile, was Mr
Afzals first major call of the year.
We bet on the European Central Bank (ECB)
to win against the Bundesbank in the fight
over whether or not to launch quantitative
easing, he says.
He says that the newly launched 1.1 trillion
euro program by the ECB to buy Eurozone
debt has the potential to dramatically
improve confidence in the financial markets,
thus increasing the attractiveness of
European equities.
The ECB also avoided worsening political
squabbles by spreading the asset purchase
risk to the individual central banks, with only
20 per cent of the risk to be shared, he says.
The ECBs bond buying should also push
the euro lower. Apart from making the
Eurozone more attractive for tourists, many
European companies typically generate a
high proportion of their sales from outside
Europe. This leads to a significant boost to
the economy.

15

16

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

A passion to serve the ultra-rich

Standard Chartered possesses a keen understanding of family dynamics and an ability to advise
and execute across a range of business and private wealth needs, says Stephen Richards Evans,
global head of Standard Chartered Private Banks ultra high net worth segment
Stephen Richards Evans, global head of
Standard Chartered Private Banks Ultra High
Net Worth (UHNW) segment, has done the
gamut of things for his clients, from planning
complicated family business structures to
searching for suitable nannies or finding private
jet slots at airports.
But for a senior banker, what is most important is
the ability to debate with clients over business
and asset structuring strategy and then
execute the plans, he says.
The selection of your banker is critical. UHNW
clients are not looking for a bank that only
provides investment services. They need
someone with the nous, the industry knowledge
to be a sparring partner, Mr Evans says.
The UHNW senior banker helps the client think
about whether he has a clear strategy to build
wealth. The more wealth you have, the more
likely youll have international assets, the more
diverse your asset base, and the more likely
youll require complex solutions.
As a universal bank with a heritage in Asia,
Africa and the Middle East going back more than
150 years, Standard Chartered Private Bank
stands out for its ability to deliver corporate
finance services, he says. These include
debt-raising and commercial banking services to
provide working capital.
Last December, Standard Chartered set up a
new segment within its private bank to cater to
UHNW clients, defined as those with more than
US$30 million with the bank, net of debt.
There are several hundred UHNW clients in the
bank. They form a small percentage of our client
base but a big percentage of our assets under
management (AUM) and revenue. We want to
focus on what their needs are, says Mr Evans,
who relocated from Dubai to Singapore to lead
the newly-created segment.
As a bank that has longevity in the region for
instance, weve been in Singapore since 1859
weve been privileged to look after the
incorporated and personal wealth needs of
UHNW clients for generations. This refreshed and
refocused strategy is simply a natural extension
and enhancement of everything that weve done
and continue to do for these clients.

An offering for family businesses

Clients see their businesses as the main engine
of their wealth. Personal wealth and investing
takes a back seat, Mr Evans notes.
A joint report between Standard Chartered
Private Bank and Campden Wealth Research last
year found that UHNW business owners prioritise
managing their businesses ahead of managing
their wealth. They remain highly involved in their
businesses operationally and financially, even
though those businesses are mature.
With the importance of a clients incorporated
business in mind, a private banker needs to plan
and execute across three areas: wealth
structuring, wealth management and risk
management, Mr Evans says. Wealth
structuring refers to organising the family
holding structure to protect and preserve assets.
Wealth management refers to knowing when to
sell a part of a business to public markets,
another company or a trusted co-investor. Risk
management refers to putting in a framework to
limit exposures to equity, foreign exchange or
commodities. This can be done through
diversification, limit setting or hedging.
You need a banker who is good in all three, who
has the breadth of experience and who
understands the territory, Mr Evans says.
Standard Chartered Private Bank has made
recent appointments to bolster its UHNW team.
It has appointed Richard Pattle as its vice

chairman of private banking clients to lead client

engagement. Mr Pattle was a former battlefield
helicopter pilot and was previously part of the
British royal household.
Two other recent appointees are Rahul
Raswant, who has an extensive background in
strategy, investment and equity investing. He
will formulate and deliver the UHNW proposition.
Alison May Chan, who previously headed Julius
Baers North Asia business management, will
develop Standard Chartereds UHNW business
in greater China.
Mr Evans himself previously led the banks
private banking activities in the Western
Hemisphere. He has worked in corporate
finance, international trade and project finance.
He was also Asia CEO of Lloyds Bank and a
regional CEO in HSBC Private Bank.

Delicate discussions
Given the family business aversion to parting
with equity, debt raisings are popular. The bank
can help even when it is not easy to do so in
certain volatile sectors, Mr Evans says.
He cited an example where the bank was able to
link a family up with a cornerstone investor, who
happened to know the family but was not aware
they needed financing. This is a traditional
banking intermediary role. Because we
developed a strong and trusted relationship with
both sides of the transaction, we were able to
have an insight. That makes us a bit different,
he says.
Mr Evans also recalls a time when he helped a
family member who was not interested in the
family business to restructure his holdings. After
a series of very sensitive and diplomatic
discussions, we gently suggested to the patriarch
that one of his key children did not want to be part
of the family business. We set up a family fund
and an investment committee. The structure
allowed people's ownership to change,
crystallised the ownership and monetised it, while
preserving the integrity of the family, he says.

Thought leadership, philanthropy

Standard Chartered Private Bank also helps
UHNW clients meet other unique individuals
around the world.
When British politician Boris Johnson was in
Singapore recently, the bank arranged for a
meeting with a small group of its clients. The
Mayor of London has done a lot of things for
London, not least the Boris bikes campaign to
encourage fitness and mobility by providing
cheap transportation. Clients love off-the-market
transaction ideas, they appreciate the
opportunity to share ideas with him and get
ideas on investment opportunities in London,
Mr Evans says.
Standard Chartered also helps clients leave a
mark on their communities through its Seeing is
Believing project that helps treat curable
blindness across Asia, Africa, the Middle East
and South America.
The bank helped one of its clients build an eye
clinic in his community that is sustainably funded
by paying patients, Mr Evans says. The client
donated the land and building and the bank
roped in a non-governmental organisation.
Mr Evans, who has been in banking and finance
for over thirty years, says that it is ultimately this
passion to serve clients, coupled with the ability
to understand their needs and connect clients to
relevant people, that sets a good private banker
apart from the rest.
In this field, you get to meet the most
fascinating individuals. To be with and help
these individuals who all have different stories is
a privilege in itself.

From left to right:

Rahul Raswant, Executive Director, UHNW, Private Banking Clients;
Alison May Chan, Managing Director, UHNW Solutions, Private Banking Clients, Greater China;
Stephen Richards Evans, Global Head, UHNW, Private Banking Clients;
Richard Pattle, Vice Chairman, Private Banking Clients

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015

17

Stay invested through volatile times

The global search for yield will result in opportunities in Europe and Asia, says UOB Private Bank
Chief Investment Officer and Head of Investment Products and Solutions, Neo Teng Hwee

Risk assets, in particular stocks and

bonds, continue to be worth holding in
a volatile 2015, says UOB Private Bank
Chief Investment Officer and Head of
Investment Products and Solutions,
Neo Teng Hwee.

The global search for yield would favour

some of these high interest rate countries. In
China, monetary policy is moving towards
easing. Reforms have brought about
short-term pain, but should be positive for
markets in the medium-term, he says.

Even while markets look modestly

expensive, Mr Neo says opportunities
can be found in Japan and Europe
where monetary easing is taking place.

Impact of rate increases on Asia

In Europe, we prefer the export

industries, particularly Germany because
its cyclical and it gets the most mileage
from a weakening Euro. We also like
European companies with strong
dividends, which will be more attractive
compared to negative bond yields.
People are starting to look for alternative
sources of income amid current market
volatilities, he says.
He adds that he also favours the domestic
sector in Japan, especially banks and real
estate. If policymakers hit their inflation
target, these sectors are likely to do well,
he says.
Other opportunities can be found in
India, China and Indonesia. These
countries are net oil importers who would
benefit from lower prices. They have new
governments and are reforming, and also
have leeway to cut interest rates further.

On the whole, Asian stocks are not too

expensive if we look at their prices over
earnings. However, growth is likely to
slow due to the higher debt Asian
economies have taken on since the
global financial crisis, Mr Neo says.
Economies around the world are also bracing
for the impact of US rate increases, expected
to take place in the middle of the year.

The slower rate increase is because the

US economy still faces headwinds from
relatively weak business spending and
limited wage growth, he says.
Ironically, this will give markets some
breathing space. You do not want the US
to grow too fast as it will trigger an
accelerated tightening cycle.
As for bonds, Mr Neo is positive on
corporate compared to sovereign bonds.
We like Europe compared to the US. In
Asia, we are positive on bonds but would
advise our customers to be selective on
high-yield credits, he says.

New solutions

However, Mr Neo thinks the impact

would be more limited this time. Thanks
to lower oil prices and lower headline
inflation, Asian countries can cut interest
rates even with a US hike cycle, he says.

Mr Neo, who was previously responsible

for the Asia-Pacific portfolio management
business of Swiss bank Julius Baer, was
part of a new management team brought
in by UOB Private Bank in the past year.
Also brought in from Julius Baer was its
Managing Director Ong Yeng Fang, who
is now Head of UOB Private Bank. The
bank is stepping up its efforts to be a
leading boutique private bank in Asia.

This particular rate increase would also

be quite benign, with the market pricing
in a rise of 160 basis points till end-2017,
compared to 350 basis points over three
years in the past.

In the next month or two, UOB Private

Bank will be announcing a new
separately managed account (SMA)
platform as well as a discretionary
management platform, says Mr Neo.

One indirect impact of higher rates is a

stronger US dollar. A stronger US currency
has historically not been positive for Asia.

The SMA platform will allow access to

strategies from top investment advisors
while the discretionary platform will
enable customised solutions for clients.
Later on, an over-the-counter foreign
exchange trading platform, as well as
private equity offerings, will be launched,
he says.
Ultimately, as markets become more
turbulent with interest rate uncertainties,
clients should stay the course, Mr Neo
advises.
Stay invested. The markets are likely
to be volatile. But there are still
opportunities to make returns from
investments.

Invest your money

in a safe place.
Like a relationship.

Our principles dene us.

UOB Private Bank Suites, 80 Rafes Place, #07- 01 UOB Plaza 1, Singapore 048624 1800 881 6888
United Overseas Bank Limited Co. Reg. No.193500026Z

uobprivatebank.com.sg

18

WHOS WHO IN PRIVATE BANKING

The Business Times, Wednesday, February 25, 2015