Asia warming to mutual funds, says StanChart Private Bank

Having built up assets under management of $42 billion in its three-and-a-half years of existence, Standard Chartered Private Bank (SCPB) is re-aligning its organisational structure.

Rajesh Malkani, regional head of Southeast Asia, will become head of the East region, comprising Southeast and Northeast Asia. Stephen Richards Evans, regional head of Northeast Asia, has been appointed to head the West region, comprising India, the Middle East, Africa, Europe and the Americas. 

Evans will relocate from Hong Kong to Dubai for his new role, and Malkani will remain in Singapore.

The current head of Europe, the Middle East and Africa is Marianne Hay, who is leaving for personal reasons, having been in that role since May last year.

SCPB says the appointments are part of its effort "to better leverage its strong footprint and strengthen its leadership position in the regions" and that it aims to become the world’s best international private bank in and for Asia, Africa and the Middle East. 

The changes follow the appointment of Shayne Nelson as Singapore-based global head of the private bank in July to replace Peter Flavel who left for JP Morgan Private Bank earlier this year.

AsianInvestor spoke to Evans and Nelson about how the private-wealth market is changing in Asia. One thing they both note is a greater readiness in the region to consider buying mutual funds, even if inflows into such products aren’t yet rising significantly.

“We’re seeing a shift, post crisis, in that people seem more willing to use funds for greater diversification and for investing in particular themes,” says Evans, though private-wealth clients still have a heavy cash and structured deposit allocation.

Moreover, funds remain a harder sell than, say, stocks or bonds in Asia. “People are much more likely to want to take [short-term] punts in this region than in, say, Europe,” adds Evans. “In that regard funds are a harder sell, because if not explained properly, they aren't as transparent as other forms of investment. But actually reporting requirements for funds makes them pretty transparent these days.”

Nonetheless, it makes sense for investors to consider using funds in their portfolios, says Evans. “Looking at classic portfolio management theory, we know a huge percentage of performance comes from asset allocation, and funds can play a very important role within that process,” he says.

“Because if you're not invested or you always use occasional or opportunistic investments, you may miss important trading days in markets. Funds can remove that temptation to try to time everything, particularly in markets that are less liquid.”

The fact remains, however, that most high-net-worth clients in Asia tend not to want to pay the typical 75-basis-point fee to buy mutual funds, say market participants. Evans suggests they might be more inclined to if their wealth adviser can demonstrate a decent track record on choosing funds.

“We have a pretty stringent fund-selection model and go to great pains to demonstrate the correlation between selection and outcomes,” he says. “Obviously people will be willingly pay a fee if they're making money, and if there is a good solid correlation between selection and outcomes.”

But there is also the challenge of competing with onshore private-wealth operations, which are likely to become increasingly important. How does Standard Chartered intend to compete with the established onshore local brands in Asia?

Nelson stresses the fact that his firm can deliver high-quality advice and international capabilities as well as onshore capabilities.

“As the market liberalises and as capital flows more readily into and out of China, we are going to see more product availability onshore there,” he adds. “And, since Standard Chartered has a substantial on-the-ground and offshore presence, that will play to our strengths.”

Moreover, clients increasingly want diversification in their portfolio – both emerging-market products and those based on Western markets, says Nelson, who has been with the bank 13 years and took up his role in July.

Ultimately, though, firms need to make sure they’re demonstrating trustworthy behaviour, post-crisis. “If I look at the industry – bankers used to be next to doctors and lawyers in terms of the most trusted people in your life,” says Nelson. “I think doctors and lawyers are still up there, but bankers haven’t done a very good job of maintaining that level of trust. It would be good to go back to being trusted advisers rather than product-pushers.”