Wealthy Chinese to double allocations to alternatives and equities

Asia-Pacific high-net-worth individuals will boost their investment allocation to riskier assets such as alternatives and equities in the next two years, according to a survey from London-based research firm Datamonitor. They also rate advisory asset-management and financial planning as the services they will seek the most in that period.

Datamonitor spoke with 160 wealth managers in Europe and 84 in the Asia-Pacific region, in China, Hong Kong, India, Singapore and Taiwan.

In terms of broad asset classes, Chinese HNWIs have the largest proportion (around 33%) of their portfolio invested in cash or near-cash products -- around twice the Asia-Pacific average.

The Chinese also have a far smaller proportion of their portfolio invested in alternatives (around 3%), as against the Asia-Pacific average of around 10%. The average Chinese allocation to equities (20%), fixed income (19%) and real estate (25%) is similar to the regional average.

However, Chinese HNWIs' appetite for risk is set to increase in the next two years. Equities now constitute one-fifth of Chinese HNW portfolios, but will in two years have reached a proportion of 46%, a higher percentage than in other countries in the region. And their allocation to alternatives is set to more than double to around 8%. Meanwhile, their allocation to cash or near-cash products will more than halve from 33% to around 13%.

Wealthy Hongkongers have the largest proportion (30%) of their portfolios in fixed income, but that figure is set to fall to around 20% in the next two years. Their allocation to equities is due to rise from 28% to 34% and to real estate from 10% to 15%.

Singaporean HNWIs also have their biggest portfolio exposure in property, but they appear less inclined than other Asians to change their allocations in the coming two years. Their exposures are likely to remain relatively stable, with just a slight shift (a couple of percent) out of fixed income and into equities.

Taiwanese HNWIs have a relatively high proportion of their portfolios in alternatives (15%) and real estate investments (28%), but the real estate allocation is expected to drop to around 24% and the equities allocation to rise from 22% to 28%.

Indians, meanwhile, have the biggest proportion (33%) of their investments in equities. Their portfolio allocations are likely to remain fairly stable, with a small rise in alternatives allocation (from 4% to 6%), in equities allocation from 33% to 36% and real estate (23% to 26%), while cash and near-cash products and fixed income see drops in their allocations.

As for the types of products and services Asian HNWIs will demand in two years' time, the most popular category in China was cited (by more than half the respondents) as execution-only asset management, followed by advisory asset management. 

The most popular choice among Hongkongers was financial planning, followed by execution-only asset management, while in Taiwan the top selection was tax planning and advice.

The Asia-Pacific aggregate top choice (cited by around 65% of respondents) was financial planning, very closely followed by tax planning/advice and advisory asset management.

These were also by far the most popular three choices among Indian HNWIs, with over 90% citing advisory asset management and financial planning, and close to 80% citing tax planning/advice.

The full list of products and services that respondents could choose from was: discretionary asset management, advisory asset management, execution-only asset management, cash management, financial planning, tax planning/advice, inheritance planning, mortgages, personal loans, margin lending, insurance, pensions.