Funds gaining traction in discretionary portfolios
Senior private bankers say that not only is discretionary portfolio management growing fast among Asian clients, but funds are an increasingly important part of that.
Asked during a recent roundtable on fund selection hosted by AsianInvestor in Singapore* whether the fund penetration rate was higher in discretionary portfolios, panellists agreed.
Adrian Schatzmann, recently promoted to global head of investment fund sales and distribution at UBS Wealth Management, said: “A discretionary mandate firstly should reflect our house view, and funds play an instrumental role in that. So you would see higher penetration in most of our discretionary mandates.”
Lina Lim, head of the portfolio management group and investors relations for Asia at JP Morgan Private Bank, agreed. “You will probably see higher fund penetration in discretionary portfolios where funds are instrumental as solutions. We tend to reflect our house view via mutual funds in discretionary products.”
But Dany Dupasquier, head of group funds for Standard Chartered, saw things slightly differently. He noted that there were two ways to gain access to its discretionary services: one method is funds of funds and the other a portfolio of securities using investment managers as sub-advisers.
He suggested it really depended on asset size. “If the portfolio is very bespoke, we have a list of securities. If we do not have strong expertise with our portfolio manager in Asia, such as on high-yield, for example, we will go through funds and outsource the expertise. For the lower client segment in discretionary, we propose funds of funds.”
In general, Dupasquier said that there was greater traction in single securities within discretionary portfolios than funds. Still, he noted that via funds of funds in discretionary, clients tended to get more exposure to boutique firms, which was not necessarily the case with a direct fund offering.
“The practice of sub-advisers managing a portfolio of securities is extremely popular for clients in our private bank,” Dupasquier added. “So we have seen significant growth in AUM and our [fund] penetration rate has increased.”
Marc van de Walle, global head of products for Bank of Singapore, noted, too, that his bank positioned its discretionary services differently.
“We believe that if clients want to invest in discretionary portfolio management, it is because they want access to individual securities and an individual portfolio manager,” he stated.
“So most of our discretionary offering does not invest in funds. We tend to have more funds for portfolio management. The two offerings are differentiated.”
But where there was universal agreement was that having a house view as a bank was synonymous with use of funds.
Van de Walle pointed out that Bank of Singapore had a house view which served as a broad guide to investing in different asset classes.
He stated that every investor should have a core portfolio with an asset allocation reflecting their risk profile and that this was a long-term proposition. Next to the core is a satellite portion that is more tactical.
“Funds fit very well into the core portion,” said Van de Walle, adding: “Funds are a very efficient way to fill the various buckets of the house view, both core and satellite, thanks to the level of diversification they offer as well as professional management.”
AsianInvestor is due to host its first ever Fund Selection Forum Asia at the JW Marriott Hotel in Hong Kong on November 12. You can find out more details by clicking on this link.
To read a full transcript of the private banking roundtable discussion sponsored by Aberdeen Asset Management, see the forthcoming (September) edition of AsianInvestor magazine.