90 Day Round-Up (August - October 2021)

9 0 D AY R O U N D - U P CHINA | T E CHN O LO GY | I N V ESTM EN TS Selec t e d t o p s t o r i e s f r o m Aug u s t t o O c t o be r 2 02 1

CONTENT 3 CHINA 4

BNP Paribas mulls onshore WM JV with Agricultural Bank of China

5

Evergrande won’t be China’s “Lehman moment”: Tai Hui of JPMAM

7

“Common prosperity” can’t be achieved at the cost of precipitating a financial crisis:

John Woods of Credit Suisse

9

GBA Wealth Management Connect raises questions over cross-border marketing

11 TECHNOLOGY 12

Haitong International uses Avaloq Wealth to accelerate PWM digitalisation

13

To avoid ‘data swamps’, PBs must keep client data fresh and reduce silos

14

Holistic approach and digital tools power growth of StanChart India’s affluent business

15 INVESTMENTS 16

Thematic mandates, ESG-investing help drive DPM mandates: Alice Tan of Maybank Singapore

18

Nuveen nets US$213.5 million for APAC realestate strategy from European investors

20

China’s markets poised for a windfall: Mark Matthews of Julius Baer

23

UBS launches second QDLP product in China

Also from Asian Private Banker

apb.news/roundup

CHINA

3

3 September 2021

CHINA

BNP Paribas mulls onshore WM JV with Agricultural Bank of China

B

NP Paribas’s asset management arm is in talks with the wealth management subsidiary of Agricultural Bank of China (ABC) to set up a wealth management joint venture, targeting the country’s rapidly expanding US$19 trillion wealth management market.

The French firm will hold a majority stake in the yet-to-be-formed joint venture, which would provide access to ABC’s large retail client base in mainland China, according to a Reuters report.

In addition, BNP Paribas Asset Management has an existing Shanghaibased wholly foreign-owned enterprise (WFOE) under the qualified domestic limited partner (QDLP) scheme. The WFOE has launched a water-related fund strategy in 2019, according to records from the Asset Management Association of China. The French firm also holds a 49% stake in an onshore investment manager — HFT Investment Management, together with Haitong Securities (which holds 51%) since 2005.

Established in July 2019, ABC’s wealth management unit had RMB 1.1 trillion (US$170 billion) in wealth management products as of the end of June.

A spokesperson from BNP Paribas declined to comment, and the Agriculture Bank of China has not responded to a request for comment.

The first to receive approval was Amundi BoC Wealth Management, established by French asset manager Amundi and Bank of China’s wealth management subsidiary. Amundi is a majority shareholder with a 55% stake in the entity. The JV launched its first product — a fixed-income close-ended fund — a few months after regulatory approval in September 2020.

The Reuters report added that Amundi initially was in discussion with ABC, but later chose Bank of China as an onshore partner.

Following the regulatory greenlight for Amundi-BoC, BlackRock CCB Wealth Management, a JV between BlackRock, CCB Wealth Management and Temasek, won approval last August, and this February, Schroder BOCOM Wealth Management, a JV between Schroder Investment Management and BOCOM Wealth Management, became the third one. Later in May, regulators also gave the nod to the JV between Goldman Sachs Asset Management and ICBC Wealth Management.

In addition, J.P. Morgan Asset Management has partnered with China Merchants Bank Wealth Management — the asset management unit of CMB — to become a “preferred product provider” in December 2019.

Foray into China with WM JVs

This May, CBIRC also made a new move to explicitly include majority foreign-owned JVs as part of the wealth management company (WMC) scope.

The latest news comes as China continues to open up its vast financial markets to foreign participants. Foreign firms have been permitted to apply for majority ownership in their onshore WM joint ventures since July 2019. More recently, Chinese regulators have injected an extra US$5 billion of QDLP quota and extended the scheme’s geographical coverage to nine regions in China.

“Although JVs with a majority foreign ownership structure have been regulated all along, explicitly including them for the first time in the scope of WMCs will help investors to accept such companies and make investors more receptive to their products in China,” an analyst at a Shanghai-based international consultancy told Asian Private Banker previously.

Currently, four WMC JVs with a majority foreign ownership have been approved by China Banking and Insurance Regulatory Commission (CBIRC).

4

27 September 2021

CHINA

Evergrande won’t be China’s “Lehman moment”: Tai Hui of JPMAM

A

s global markets follow the twists and turns of the China Evergrande saga with bated breath, a key advisor in Asia to US$2.6 trillion in global assets has a premonition: any potential liquidation of China’s second-biggest land developer won’t be another “Lehman moment“ for global markets.

“If you think back to [US financial firm] Lehman [Brothers], it was essentially a financial institution that after failing to get support, went under,” said J.P. Morgan Asset Management’s Tai Hui. “And back then, the question was what could happen to other financial institutions if Lehman went under, and what that meant if the interbank market was frozen and banks couldn’t get liquidity,” the chief Asia market strategist for the American asset manager recalled. “If a bank can’t get liquidity for 24 hours, it runs into significant problems.”

Lehman Brothers was an essential cog in the global network of financial institutions that depend on each other for immediate liquidity, Hui said. “If there is no node, it breaks the whole system … it gets a heart attack.”

Onshore corporate credit Market structure of outstanding credit*

Credit spread of onshore corporate bonds

B and below 0.2 trillion yuan 0.4%

Basis points 900

AAA and AAA+ 25 trillion yuan 47%

800

Unrated 22 trillion yuan 41%

700 600 500

AAA

AA

A- to AA+ 7 trillion yuan 13%

A

400

Number of defaults in onshore market

RMB billion 250

300

State owned enterprises (SOE) Privately owned enterprises (POE)

200

200

150

100

33

132

118

102

2018

2019

2020

100

0 -100

120

19

44

50 0

1 -

2014

“This time around it is a corporate …

Source: Wind, J.P. Morgan Asset Management; (Right) China Securities Index Co., Ltd. *Credit rating in Chinese onshore bond market may be inflated, given the absence of international rating agencies.

Guide to China. Data are as of July 31, 2021. and if a corporate doesn’t get liquidity for 24 hours, it might still get by,” Hui 7 Source: JPMAM said. “Even if you don’t pay up, or pay your interest, you get a grace period, I think, for 30 days. So there’s a little bit more time for different parties to get involved.”

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Financial stresses in global markets peaked following the failure of the Lehman Brothers in September 2008, according to the Reserve Bank of Australia. “Together with the failure or near-failure of a range of other financial firms around that time, this triggered a panic in financial markets globally,” the Australian central bank explained.

“Investors began pulling their money out of banks and investment funds around the world as they did not know who might be next to fail and how exposed each institution was to subprime and other distressed loans.”

The current trepidation in markets is understandable: with at least US$305 billion owed in immediate payments or about 2% of China GDP and 10% of the country’s foreign-exchange reserves, China Evergrande going under would directly affect 200,000 employees, and some 3.8 million people in China who are employed with its suppliers and companies with which it does business, DBS Private Bank’s Taimur Baig and Chua Han Teng recently told clients.

The development comes after China has tightened regulations around its real estate sector, after reining in Big Tech and for-profit education.

“Obviously for Evergrande or its suppliers and customers, that’s a major problem (a liquidity crisis) as well, but it doesn’t necessarily lead to a freeze in the liquidity in the banking system,” Hui opined. There is some precedent in the immediate past, he explained.

In March 2020, when there was a liquidity crunch in the US, the Fed pumped liquidity into the system, greasing the wheels of lending at a critical time, Hui said. “They just kept pumping, and saying look, we’ll do anything, we’ll buy anything,” he said. “And that helps to shore up confidence.”

“I think that was the lesson [China] learned,” Hui said — that if the central bank is too slow to provide liquidity, then the financial system may start to freeze. “I think China has obviously taken that as a lesson.”

China: Regulations Timeline of key events in China’s recent regulations 2020

26 Dec: PBoC, CBIRC, CSRC, SAFE* summon Ant for the first time

2021

12 Apr: PBoC, CBIRC, CSRC, SAFE* summon Ant for the second time

10 Apr: Alibaba receives record RMB18.2bn fine on monopolistic practice

6

2 July: CAC*** launches Cybersecurity review of Didi

26 Apr: SAMR** investigates Meituan for suspected monopolistic practice

10 July: SAMR** announced that it has banned the merger deal between Huya and Douyu

16 July: New rule announced to promote social security and rights of employees for online platforms

23 July: 8 ministries jointly released a notice to regulate the property market, which includes cleaning up irregularities in community value added services by property manager

24 July: Policy on reducing burdens of students and families is issued where foreign firms are banned from acquiring or holding shares in academic after school tutorings

20-27 August: Policies targeting data collection, analytics and application in all of Internet operations, including algorithm-based recommendation, were passed

30 August: Online gaming companies will be banned from offering minors (those under age 18) from accessing games during weekdays and minors should only be allowed to play games from 8pm to 9pm during weekends, including Fridays, Saturdays and Sundays.

Source: Various news sources, J.P. Morgan Asset Management. *PBoC: People’s Bank of China; CBIRC: China Banking and Insurance Regulatory Commission; CSRC: China Securities Regulatory Commission; SAFE: State Administration of Foreign Exchange. **SAMR: State Administration for Market Regulation oversees all manner of market controls, including regulating anti-competition behavior, intellectual property rights, drug safety supervision and issuance of business licenses etc. ***CAC: Cyberspace Administration of China is the central internet regulator, censor, oversight and control agency for China.

The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.

Guide to China. Data are as of July 31, 2021.

Source: JPMAM

6

8 October 2021

CHINA

“Common prosperity” can’t be achieved at the cost of precipitating a financial crisis: John Woods of Credit Suisse

“In our view, a credit crunch is the last thing China wants – or needs – right now.”

T

he surprise default on a dollar bond traded offshore by Fantasia Holdings Group Co., is putting already jittery investors on tenterhooks into the weekend.

With revenue not even one-tenth that of the China Evergrande Group and a US$12.9 billion debt that is dwarfed by Evergrande’s more than US$300 billion obligations, Fantasia’s reluctance to pay up US$206 million to bondholders on 4 October sent markets spiralling down. What particularly rankled investors was that the developer, ranked 64th in the industry, claimed to have RMB 27 billion or US$4.2 billion at the end of June.

Domino effect?

On Wednesday, Hong Kong-listed Evergrande ally Chinese Estates Holdings said it planned to take the company private after its shares plunged as much as 44% this year to their lowest level in nearly two decades. Chinese Estates is the second largest shareholder in Evergrande — after founder and chairman Xu Jiayin.

“Directors are cautious and concerned about the recent development of China Evergrande Group, including certain disclosures made by China Evergrande Group on its liquidity,” the investments holding company said in a filing to the stock exchange late Wednesday.

The development triggered the biggest sell-off in at least eight years in the Chinese high-yield dollar-denominated bond market. It also sent borrowing costs for the beleaguered real-estate sector in mainland China to its highest level in years. The yield on the ICE BofA Asian Dollar High Yield Corporate China Issuer index (which tracks high-yield dollar bond issuances from Chinese firms) was more than 19.8% Thursday, its highest level in nearly a decade. The increase in costs comes as the value of China’s nationwide land sales likely fell by 17.5% in August from a year earlier, its steepest slide since February 2020.

The risk is particularly acute for the private banking industry. Since late last year, CIOs and relationship managers have been advocating exposure to high-yield debt, especially in China, to counter the low interest rates environment.

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7

The tighter regulation through the “three-red-lines” has become a game changer, which has amplified the stress for real estate developers

The Three Red Lines for Real Estate Firms Since August 2020 Advance Receipts

• 70% Liability-to-asset ratio excluding advance receipts

Chinese Property Developers: Share of Firms Hitting the Three Red Lines by Criteria (%) 70

70

60

60

50

50

40

Leverage

• 100% for net debt ratio

30

40 64

20 10

Liquidity

• Cash-to-short term debt ratio >1

Source: Natixis Source: Natixis

0

30 37

33

> 70% Liability-to- > 100% for net debt Cash-to-short term asset ratio ex. ratio debt ratio < 1 advance receipts

20 10 0

N.B. Top 100 real estate firms with available data included. Data as of H1 2021.

Source: Natixis, Financial Statement, Bloomberg, WIND

7 C2 - Internal Natixis

When the going gets tough

A critical sector

“Market participants have now started to price in the risk of disorderly consequences and possible failures of the developers,” John Woods of Credit Suisse told Asian Private Banker. “We believe such fears are misplaced,” the CIO for Asia Pacific at the Swiss bank said.

“While we believe Fantasia itself poses fewer threats to broader markets than Evergrande due to its smaller size, the builder’s saga has flagged several risks that are increasingly weighing on investors’ minds,” RBC Wealth Management said. “Observers have been concerned about the possible fallout and contagion from the Evergrande crisis, including how it might constrain China’s economic growth,” it added.

“The consequences of a disorderly default are immense to both the property sector and wider financial system,” because “China is highly vulnerable to contagion risk” amid the decelerating growth and the lingering effects of the COVID-19 pandemic, Woods said. “A slump in property prices as a result of a disorderly default could have a damaging impact on China’s financial stability,” he added.

Credit Suisse believes Chinese banks may be asked to roll over principal and interest payments, enforce haircuts on certain liabilities and assets, and ensure that individual homebuyers are protected as much as possible. “In my view, authorities may coordinate with banks to ensure sufficient liquidity is provided, such that key property projects are completed for sale and delivery,” Woods opined.

“In other words, the affected developers are likely to be restructured using the types of strategies, techniques and tools that have proven effective in the past, even if such a restructuring could be long and difficult,” Woods told Asian Private Banker. “On a larger scale, this potential collapse represents the first major test for the government’s ambitious “common prosperity” mandate.”

Property development is a critical sector for China, accounting for nearly one-fourth of the country’s economic activity, the Canadian wealth manager said. “We believe any potential contagion across the property sector and financial system would be manageable as we think Beijing would provide state assistance and also fiscal stimulus to offset any meaningful decline in economic activity,” it added.

“On the one hand, the government is seeking to address the spiralling cost of housing by – among other things – reducing leverage among property developers,” said Woods. “On the other hand, common prosperity cannot be achieved – or gained – at the cost of (precipitating) a financial crisis.”

8

15 October 2021

CHINA

GBA Wealth Management Connect raises questions over cross-border marketing

T

he Cross-boundary Wealth Management Connect Pilot Scheme (WMC) in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) has raised questions over how banks can remain compliant when conducting marketing in other jurisdictions and which products are eligible.

The People’s Bank of China (PBoC) and Hong Kong Monetary Authority (HKMA) promulgated WMC in September after a public consultation by the Guangdong branch of the central bank in May. Melody Yang, partner at Simmons & Simmons Beijing, told Asian Private Banker that compared with the existing connect programmes, WMC has largely streamlined extra approval and authorisation processes, expanding the channel of capital raising for Hong Kong and mainland-based asset managers.

Melody Yang, Simmons & Simmons

“WMC, in essence, provides a passporting regime within the GBA, which is not the most popular way for the Chinese regulator to grant access to foreign investments or investors.

In other existing programmes like QDII, QDLP and the mutual fund recognition between the mainland and Hong Kong SAR, a lot of times Chinese authorisation or governmental registration is required,” said Yang.

“But in WMC, it seems that the products become readily available for purchase, as long as the product has checked the relevant criteria, it is ranked at low to medium risk, and the financial institution works together with qualified placement agents or distributors in the GBA.” Jocelyn Chen, associate at FenXun Partners, told Asian Private Banker that the debut of WMC marks “the strongest tone” among crossboundary investment programmes in terms of enhancing the investment partnership between Mainland China and Hong Kong.

Jocelyn Chen, Simmons & Simmons

HKMA officials at the WMC launch press conference

She pointed out that WMC differs from previous connect schemes in a number of ways. WMC opens up cross-boundary wealth management products for eligible individual investors across the GBA, creates a closed-loop fund flow channel between banking systems in Mainland China and Hong Kong, while there are calls for supporting measures that could form the foundation of future cooperation, such as placing orders via phone calls or the internet.

Clarification needed on marketing cross-boundary products According to Yang, there is no overarching rule on marketing crossboundary investment products for asset managers from other jurisdictions. Instead, they follow rules from other cross-border market access regimes like QFII, CIBM Direct, QDLP, QDIE or Mutual Recognition of Funds for the purpose of capital raising.

“This also highlights the significance of this WMC programme because although there’s still an investment quota and some actual requirements for eligible PRC investors, these qualifications are very easy to be met and this creates the need to establish a new marketing routine,” said Yang.

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In the initial phase, the HKMA has launched the WMC with an “execution-only” model. That is to minimise the need for immediate changes, but Kevin Yuan, senior counsel at FenXun Partners, told Asian Private Banker that “the line between soliciting products and enhancing product visibility to clients is not so clear in practice”.

Kevin Yuan, FenXun Partners

“Banks are advised to provide only factual information about the products, and avoid providing any information or services that may be construed as the banks being involved with the solicitation and recommendation of the product or making an offer to the public in relation to investment products or proactively marketing the product to the public,” said Yuan.

“As a general rule, when the content relates to specific product features, such as the expected return or special risk embedded in the products, there is a higher risk this will be considered as products solicitation.

As such, banks are recommended to only provide general information regarding the product (e.g. product name and relevant investment category).”

Despite the need for clarification on cross-boundary marketing, Yang said this is “less of a concern” for international asset managers looking to increase their visibility in the mainland. While it may take time for onshore clients to become familiar with these brands, their onshore partner banks can use their private banking channel to target clients one-on-one or hold a roadshow targeting qualified investors.

Banks should keep abreast of regulatory guidance Yuan said that while the WMC scheme has set out a clear framework covering almost all of the key arrangements, detailed interpretations and specific guidance from the local regulators may still follow.

“The regulators can be expected to pay close attention to and keep track of frequent issues encountered by participants during the practice and provide on-going guidance on a regular basis. It is imperative that the banks are kept abreast of and also comply with the different laws and regulations across the different markets,” said Yuan.

For instance, Yang believes the market is expecting more clarification on the types of products that are eligible for the southbound route of WMC. The HKMA is giving participating financial institutions the discretion to rate their products and assess which should be available via WMC. “I think it’s very clear what kind of products are available in the northbound route: it’s either the wealth management products launched by the wealth management subsidiary of the bank or retail funds that have been rated from R1 to R3. But what products can be sold in the southbound route? The rules aren’t very clear. For example, whether all retail funds that are sold in Macau or Hong Kong would be considered eligible products in this regime? We need to wait for more input from Hong Kong and Macau authorities.”

Chen added that WMC gives rise to complex cross-border issues, including different laws governing financial regulations, taxation, and dispute resolution mechanisms supervised by regulatory authorities in different jurisdictions.

WMC also prompts questions on legal and compliance issues in areas such as cross-border data transfers and personal information protection. Chen highlighted the mainland’s Personal Information Protection Law of the PRC, which comes into effect on 1 November 2021.

“We expect to see banks launching their WMC-related products and services in a phased manner,” said Yuan. “As banks are required to submit documents to the local regulatory authorities for official filing and also have their business system tested and evaluated under the guidance of the regulatory authorities.”

10

TECHNOLOGY

11

1 September 2021

TECHNOLOGY

Haitong International uses Avaloq Wealth to accelerate PWM digitalisation

O

ver the coming months, Haitong International is to implement Avaloq Wealth’s specialised solutions for its Private Wealth Management operations in Hong Kong and Singapore, according to a press release from Avaloq.

Launched in July 2020, the Avaloq Wealth platform aims to help banks and wealth managers to provide personalised investment advice and bespoke services to clients in a more timely and cost-efficient manner.

“As in most other similar industries, we are seeing a strong trend towards digitalisation in wealth management,” said Austin Luo, Haitong International’s head of Private Wealth Management.

Pascal Wengi, managing director for North Asia at Avaloq, commented that as a digital and core-agnostic platform, Avaloq Wealth is designed to “seamlessly integrate into existing IT landscapes”.

“It is therefore ideally suited to unleash the full growth potential of Haitong International’s Private Wealth Management business,” Wengi added.

In June this year, Avaloq announced a partnership with Vontobel, offering tailored structured investment products to private clients in real-time on the Avaloq Wealth platform.

He added that Haitong International aims to help clients optimise portfolios by “designing top-notch investment solutions” for them.

12

15 September 2021

TECHNOLOGY

To avoid ‘data swamps’, PBs must keep client data fresh and reduce silos

T

he elusive synergy resulting from data analytics can be achieved only if private banks focus sufficiently on keeping client data updated and breaking down silos, according to fintech specialists.

The pandemic has speeded up the digitalisation journey at many private banks. COOs recently shared with Asian Private Banker their eagerness to use data analytics to level up their service offerings.

Shidan Murphy, director of APAC solutions specialists, data intelligence at data analytics provider Altair, told Asian Private Banker that banks have been both a beneficiary and a victim of technology advancement over the years.

Lacking compatibility “Because of their legacy, some banks still use outdated hardware and software systems. In one way, technology has benefited banks. In another, the steady advance of technology has meant that banks may have acquired and produced solutions with each generational leap of technology, without these technologies necessarily being compatible with one another,” said Murphy.

“If banks have advanced other technologies without a firm focus on reducing silos wherever possible, what can happen is that banks aiming to build a data lake, end up with a data swamp. That’s the reality in a lot of banks.”

Murphy explained that he has worked with many banks that tackle the challenges posed by the rapidly changing technological landscape through a heavy emphasis on a task called ‘data virtualisation’ or ‘data harmonisation’. Essentially, this means bringing together data from systems of different generations.

It generally takes a year or two for banks to migrate their data from paper-based to machine-readable, he added. The transition speed may be longer when banks advance from generating digitalised reports based on manual inputs to producing analyses of predictive or prescriptive data — data that can be used to predict client behaviour and generate advice in the best interest of clients. ​​ “How long does the journey take from reporting to prescriptive? It depends. We are working with some banks in the Philippines, that are aggressive and fast-changing because they have a small client base and can implement the changes quickly. Bigger institutions can take years.”

Breaking down data silos Besides the compatibility issue, Murphy said another pain point in data management for private banks is to maintain an updated database.

“Except for transaction-based data such as debit and credit in an account, most data in a bank are static-point data, which means that the data collected are accurate at the time of sign-up,” he said. “But five years later, the data might be outdated: the client has changed but the bank isn’t aware of that.”

According to a white paper published by fintech consultant Synpulse on a related topic, static data — such as occupation, country of residence, whether the client is on the Politically Exposed Person (PEP) list, and risk tolerance — only get to be renewed in periodic reviews. While RMs might have noticed changes in the static data, they may have failed to update the information on the bank’s platform. The outdated information can then lead to problems, such as product risk tolerance mismatch and KYC loopholes.

In order to generate a more updated and accurate risk analysis and KYC record, Synpulse suggested that both static and dynamic attributes of clients data should be considered in the creation of a dynamic database.

For instance, an ideal dynamic risk model should rely on both data points kept in the bank’s client profile as well as dynamic data such as clients’ networks and negative media exposure generated from updated online searches.

To achieve this, private banks have to break down silos across different business lines and integrate client data onto a single platform shared by the bank group, so that data can be shared to establish a network and create a more holistic view of clients’ investment risks.

“Operational efficiency and better risk detection capabilities have a direct impact on a bank’s regulatory costs and its competitiveness against its peers,” according to Synpulse.

“While it may not be easy to implement continuous KYC in private banking — due to the lack of publicly available structured data — solving the problem with the skilful application of network analytics and data science will create a significant competitive first-mover advantage.”

13

11 October 2021

TECHNOLOGY

Holistic approach and digital tools power growth of StanChart India’s affluent business

D

riving the affluent business of Standard Chartered India are a focus on its One Bank approach and digital enhancements that address client needs, said Nakul Jain, managing director, private banking, priority and deposits, Standard Chartered India.

Jain asserted that the affluent, priority and private bank business in India is now in a “sweet spot”, with the bank having merged its consumer business and wealth management into one division.

“We recorded impressive growth numbers last year and we will continue to invest in the business, with the ability to leverage each segment’s cross functional strengths,” said Jain.

Nakul Jain, Standard Chartered

“Between our corporate banking and private banking business, almost 75% of the top families in India bank with us, on the strength of our multi-generational relationships, our ability to deliver seamless OneBank solutions and our large international network,” he explained.

According to Asian Private Banker’s India 2020 Private Banking & Wealth Management AUM league table, Standard Chartered Private Bank in 2020 had US$12.7 billion in AUM.

Seamless spectrum Standard Chartered Bank provides both in-house solutions and referrals to its subsidiary Standard Chartered Investments and Loans (India) Ltd. — a non-banking finance company (NBFC), which was set up to supplement the bank’s core business and to build more book.

In the affluent segment, the bank serves clients across the wealth spectrum — entrepreneurs, C-level executives and NRIs.

“That’s where we are truly differentiated, since we are able to seamlessly customise solutions for clients,“ explained Jain. “There is this common theme which runs right from priority banking to private banking, which is the client continuum. For both the client and talent movement, there is a clear continuum that is operating now, and that makes the whole proposition so strong.”

In the private banking business, the bank’s approach centres around three ‘A’s. The first is providing clients with “Access” to platforms for a range of products and solutions. The second is the bank’s “Asset Allocation” view, that the bank highly recommends clients should follow. The third is “Affinity” — working closely with clients on philanthropy programmes, next generation engagements and bespoke access and events.

“We put clients at the centre of everything we do and, I think, income follows through. Being a large international bank we are able to cater to all the needs of clients — across banking, wealth, lending or business and corporate solutions. A single unified delivery makes it convenient for the clients to conduct their business with us,” noted Jain.

Digital keeps improving Jain mentioned that the ongoing COVID-19 pandemic has led to a “far reaching effect” on clients’ wealth related beliefs and behaviours — including an appreciation of digital channels.

“We now have almost every service and solution digitally available across banking and wealth solutions. We have enabled several features (such as digital onboarding) and have made almost over 20 enhancements digitally for our clients to conduct transactions.”

The bank has been integrating AI and machine learning into credit risk evaluation workflows, in addition to combining an AI-led marketing automation tool that will enable the bank to have hyperpersonalised digital conversations with their clients.

Earlier this year, Standard Chartered launched SC Invest in India, an enhanced wealth platform for clients to manage their portfolios. It is planning to roll out My RM in India next year.

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INVESTMENTS

15

3 August 2021

INVESTMENTS

Thematic mandates, ESG-investing help drive DPM mandates: Alice Tan of Maybank Singapore

T

hematic mandates that offer an exposure to long-term global growth as well as an increase in interest for ESG-based investing have helped Maybank Group Wealth Management increase the penetration of its discretionary portfolio management offerings as part of its AUM.

DPM mandates have increased by 75% from December 2020 to April 2021, making up 13% of Maybank’s AUM, thanks to some “unique thematic mandates” that helped differentiate offerings, said Alice Tan. “Discretionary mandates are getting traction among our clients,” the head of private wealth and head of products and investment solutions told Asian Private Banker.

One mandate that has done well is Maybank’s long-term global growth (LTGG), said Tan. The mandate focuses on “forward-looking themes to identify quality, innovative as well as exceptional growth companies that can contribute towards a more sustainable and inclusive world for current and future generations”, she said.

Maybank expects the global economy to grow above-trend in 2022, albeit at a moderate pace, as fiscal and monetary supports fade. Notably, the US Federal Reserve is signalling the likely scaling back of monetary stimulus with the recovery well on track, the bank said.

Alice Tan, Maybank

Putting your heart where your money is “We are also witnessing an increased interest in ESG investing,” said Tan. “There is a growing awareness among customers to focus on sustainable investments across various asset classes.” ESG-focussed multi- asset funds along with the LTGG mandate have seen an increased interest in the last 12 months, she added.

Across the Maybank Group wealth segments, 15% of the total investments are in ESG-related wealth products, Tan said. At Maybank, there is an internal focus on increasing AUM in sustainable investments, Tan told Asian Private Banker.

“The other thing that we see is that there is a rising interest among our clients to get access to the private investments, including the pre-IPO deals, since public markets valuations climb higher,” said Tan. “This is usually for clients that have the ability to withstand the low liquidity and have a longer term industry horizon.” Universal life insurance policies too are witnessing more demand among UHNWIs, Tan added.

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The real deal

Bracing for a wild ride

Clients are gaining exposure to Singapore-listed real-estate investment trusts or S-REITS through Maybank’s discretionary mandate offerings, said Tan. “Sectorwise, we expect to see resilient income coming from the industrial REITs that are benefiting from increased e-commerce and logistics demand, due to the pandemic.”

These investment options have gained traction amid Maybank’s expectation of higher volatility ahead due to the potential shift in policy stance coupled with less compelling valuations. “In addition, the regulatory uncertainty on Chinese technology firms has lifted the risk premium and suppressed near-term return expectations,” the bank said in its Investment Strategy & Outlook report for August.

S-REITs tend to be an excellent source of stable income for customers, especially when S-REITs offer higher income than global peers, Tan explained. Singapore property prices, as measured by the Urban Redevelopment Authority’s (URA) price index for private residential property, is up 7.2% in the past 12 months and with more Singaporeans returning home, housing demand has risen, she added.

Taking a prudent stance, the bank tactically downgraded China and Malaysia to neutral, which consequently led to a neutralisation of Asia ex-Japan and global equities from overweight. “We raise cash to neutral and would wait for the opportunity to redeploy the cash into risk assets,” Maybank told clients.

Property investments are expected to get further support from low mortgage rates and flush liquidity, Tan said. “COVID-19 restrictions have meant constructions are delayed and supply is tight, stoking demand for property in Singapore.”

The bank maintains its neutral stance on fixed income, continuing to prefer credits over sovereign bonds and holding its overweight on Asia investment-grade and US high-yield credits due to their “attractive riskreward outlook.”

The retail REITs have benefited from the reopening of Singapore’s economy while office demand has fared better than expected, Tan said.

“What may lag behind are hospitality REITs which will take slightly longer to recover due to border restrictions.”

From a portfolio hedging perspective, Maybank advocates maintaining gold exposure to mitigate uncertainties, including the threat from the COVID-19 Delta variant and geopolitical tensions. Maybank turned neutral on gold at the start of the year after staying overweight on the precious metal for the last two years, Tan told Asian Private Banker.

“We still recommend customers to hold some of this precious metal, as a portfolio diversifier even though the expected return will be more moderate,” Tan said. “Although as recovery becomes more entrenched, the upside to gold prices may be capped by the higher real rates.”

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6 September 2021

INVESTMENTS

Nuveen nets US$213.5 million for APAC realestate strategy from European investors

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uveen Real Estate on Monday said its Asia Pacific Cities strategy raised US$213.5 million from four Dutch and Swiss investors as the region’s supply-chain and logistics industries benefit from investor interest in real assets.

The real estate investment unit of Nuveen, a US$1.2 trillion asset manager, said the latest investment into the open-ended strategy comes on the back of the US$680 million raised so far from investors in Europe. The platform has raised over US$900 million from 12 investors since its inception in November 2018, Nuveen Real Estate added. The recent inflows are from insurance, pension, private investors and family offices, the firm told Asian Private Banker. The Asia Pacific Cities strategy allocates 64% of its capital to the logistics sector, 18% to residential and 18% to office assets across four Asian cities, it said.

“European investors (…) see robust opportunities in the Asia Pacific market, which is highlighted by their commitment into our flagship strategy there,” Nuveen Real Estate’s Gabi Stein said in a press release. The managing director and senior real estate specialist at the manager of US$133 billion in AUM added that despite the “headwinds from the pandemic”, investors have remained attracted to Gabi Stein, Nuveen Real Estate the region, on account of its strong demographics and diversification benefits. “We anticipate that the demand for core strategies in Asia Pacific will only increase over the coming years.”

Louise Kavanagh, Nuveen Real Estate

The former’s spreads remain above long term values despite the slight decline recently. The compression has helped the sector remain at value, though not for long, Louise Kavanagh, managing director Asia Pacific at Nuveen Real Estate has told Asian Private Banker. Real estate in global cities still offers attractive income returns compared to the respective bond markets, according to Nuveen Real Estate’s Perspectives in today’s real estate market report.

That interest comes on the back of real estate still offering real yields above comparable government bonds.

(Continued on next page.)

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Pricing spread over 10-year gov. bonds Global cities real estate continues to offer attractive income returns compared to the respective bond markets. Over the medium term, spreads are set to fall slightly due to rising interest rates but remain above long term values.

Residential

Office

Industrial

4.5 4 3.5

3 2.5 2 1.5 1 0.5 0

Q4 2020

Q1 2021

2025

Source: Nuveen Real Estate, Oxford Economic Q1 2021

OPINION PIECE. PLEASE SEE IMPORTANT DISCLOSURES IN THE ENDNOTES Perspectives in today’s real estate market

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Source: Nuveen

Nuveen Real Estate’s inaugural office asset in Sydney’s Clarence Street has reached “practical completion” after a substantial restoration and refurbishment, making available 85,000 square feet of commercial space across 12 floors and in compliance with various ESG benchmarks, the firm said.

Need for yield “With this latest commitment, we are in a strong position to look for assets offering income generation and stable distributable income, anchored on long-term structural growth,” Kavanagh said. “It has been heartening to witness continued investor interest, as well as the growth and strong investment performance of this flagship strategy in the last few years since its inception.”

Nuveen Real Estate expects strong demand for modern logistics space in the Asia Pacific, led by e-commerce and the demand for fresh groceries driving the cold storage sector. Regional office markets, including in Sydney, Singapore and Seoul, may be well positioned for long-term growth despite headwinds presented by the pandemic, the firm added. Kavanagh expects an increased allocation to real estate in the Asia Pacific region to persist through 2021, she told Asian Private Banker in July.

Investors in the Asia Pacific region, who continue to show a home bias, may be interested as well, Henry Chui, head of private wealth, Asia Pacific at Nuveen, previously told Asian Private Banker. To tap into that segment, Nuveen tied up with Nuveen Altive and iCapital to provide private wealth clients in the APAC region with access to its core global real-estate platform.

(Continued on next page.)

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Post-Covid-19, bigger divergence in market trends While the outlook for office remains uncertain, selective sub-markets maintain good value as business sentiment returns.

Sydney/Melbourne office

Office highlights

Brisbane office

•

Australian east coast markets -

While vacancy and incentives have risen across all markets, rents are likely to stabilize in 2021 as business confidence picks up

-

Sydney grade A office retains strong value on tight supply and emergence of new economy industries

Seoul office

Cyclically supportive

Cyclically neutral Singapore office

Tokyo logistics Tokyo retail

Seoul logistics

•

Tokyo -

Rents are softening as work from home initiatives bite into take-up especially in supply led sub-markets such as Marunouchi and Otemachi

-

Tight pricing remains a challenge

Tokyo office

Sydney/Melbourne student housing

Cyclically unsupportive Sydney/Melbourne retail

Shanghai/Beijing retail Hong Kong office

Singapore retail Hong Kong retail

•

Seoul -

Gangnam business district still a coveted investment and occupier market with vacancy at sub-5%

Source: RCA

OPINION PIECE. PLEASE SEE IMPORTANT DISCLOSURES IN THE ENDNOTES Perspectives in today’s real estate market

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Source: Nuveen

The Asia Pacific Cities strategy is looking at opportunities in the office sector again, the press release reads.

“The current investment climate continues to provide attractive entry points into the deep and liquid office sector across some resilient gateway cities backed by positive long-term fundamentals,” said Kavanagh. “The acceleration in structural trends brought about by the pandemic has even improved the corporate balance sheet performance of some financial, insurance, real estate services and tech-related sectors, in turn positioning high quality, prime located offices in markets such as Singapore, Seoul and Sydney for a sturdy recovery.”

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14 September 2021

INVESTMENTS

China’s markets poised for a windfall: Mark Matthews of Julius Baer

hina’s domestic equities are poised for a windfall as the government nudges household wealth away from property and into onshore capital markets, a senior private banking executive has said.

C

“Over half of that is in property and only around 7% in equities,” he noted. “But the government has made it clear property prices won’t be allowed to rise like they did before, so it would make sense for Chinese households to move more money into equities.”

“I might point out [that] a new stock exchange is being set up in Beijing,” said Mark Matthews, Julius Baer’s head of research, Asia Pacific, in a call with reporters on Tuesday. “So it’s clear the government wants to promote onshore capital markets.”

With the onshore stock market capitalised at about US$12 trillion, a doubling of household wealth invested in equities from 7% to 14% would “have a big impact”, said Matthews. The latter percentage is similar to that of Taiwan, he pointed out.

In a speech in early September, Chinese President Xi Jinping announced plans to set up the country’s third stock exchange in Beijing to host small and medium-sized businesses. The China Securities Regulatory Commission (CSRC) said its leadership was “excited” at the prospect, according to media reports. The registration system for the exchange would be similar to that of Shanghai’s STAR market, China’s answer to the NASDAQ, the regulator reportedly said.

However, Julius Baer is not recommending as much exposure to the onshore market compared to offshore equities due to the high “sentiment and liquidity-driven” nature of the former. “It’s really not the kind of way that one should be invested long term,” Matthews said. “And it’s not a digitalisation story.”

Following comments by Xi that “housing is for living in, not for speculation” at the 19th Party Congress in October 2017, Vice Premier Han Zheng reiterated in July that the property sector should not be used as a short-term tool to stimulate the economy. Major cities have increased mortgage rates and used other measures to tame runaway housing prices. China will “strive to clean up irregularities in the property market in three years”, the country’s housing ministry said two months ago.

Equity returns are likely to be higher in Asian markets outside of China as the region is poised to benefit from a surge in consumption, Matthews said.

“A lot of our clients would like to remain exposed to Asia,” Matthews said. “So we constructed a basket of Asian high quality companies that have good growth and these names are names that you’d be familiar with.” The digitalisation of the global economy would help these companies, he added.

Household wealth in China is estimated at US$40 trillion, Julius Baer’s Matthews said.

(Continued on next page.)

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Source: Julius Baer

The rise of India With China in the middle of a regulatory clampdown, some investors looking at the region have instead shifted their attention to India, Matthews opined.

India entered into a period of favourable demographic growth three years ago, similar to Japan in 1964, Korea in 1987 and China in 1994, Julius Baer’s analysis showed.

“There’s a big pipeline of companies lining up to list on the market in India” with about 100 firms, mostly technology related, planning to go public, said Matthews.

Matthews predicted that there would be more people producing than taking an aggregate, a measure of total demand for all finished goods and services produced in an economy, until around 2055. In the five years after Japan, South Korea and China crossed that threshold, stock markets in those countries rose 100%, 120% and 75% respectively, he added.

India, which has the world’s largest working population, is also poised for a massive demographic dividend that will likely give a fillip to both consumption as well as the adoption of technology, he continued.

India’s benchmark stock index is up more than 50% in the past year. It is the region’s top performer in 2021, according to the Financial Times.

U/HNWIs in India are also loading up on private-market investments, mostly in the tech sector, in the hope their value jumps after a stock market listing, Asian Private Banker reported in June.

Source: Julius Baer

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12 October 2021

INVESTMENTS

UBS launches second QDLP product in China

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BS’s wholly foreign-owned enterprise (WFOE) in Shanghai has launched its second qualified domestic limited partner (QDLP) product in mainland China.

The product of UBS Rui Hua Overseas Investment Fund Management (Shanghai) is named Global Multi-strategy Alpha RMB Private Securities Investment Fund Series 1 and targets HNWIs and sophisticated investors in China. It has finished registration with the Asset Management Association with China (AMAC), Chen Lingrong, the WFOE’s general manager and the product’s fund manager, told Asian Private Banker.

The firm’s first QDLP product — A&Q (China) Neutral Alpha Strategy Leveraged Fund — was rolled out in October 2016, AMAC records show. Other foreign firms that have launched QDLP products this year include US-based Barings which launched its third QDLP product in August.

The QDLP scheme allows qualified foreign managers to raise money in China with assigned quotas, to invest in offshore traditional and alternative investments, such as hedge funds, property and overseas equity and bond funds.

As a feeder fund, the new product primarily invests in the Cayman Islands-domiciled Global Multi-Strategy Alpha (GMSA) — a flagship strategy managed by hedge fund manager UBS O’Connor.

UBS O’Connor’s capabilities include a range of investment programmes aimed at achieving attractive risk-adjusted absolute returns with low correlation to most major asset classes and traditional investment benchmarks.

Diversified investment options This is the first time that UBS has brought such strategy to Chinese investors. With nearly 20 years’ experience in hedge fund management, UBS O’Connor currently manages US$9.3 billion for global institutional investors and HNWIs. “We hope to provide onshore investors with more diversified investment options,” commented Chen. “Investing in offshore alternative strategies could help them diversify risks, reduce volatility and explore new investment opportunities”.

As the world is facing increasing uncertainties, the team is “aiming to help investors gain alpha income through fundamental, relative value strategies”, according to Kevin Russel, global CIO at UBS O’Connor.

Expanding QDLP schemes Initially launched in Shanghai in 2012, the QDLP scheme has been expanded to three other directly administered municipalities (Beijing, Tianjin and Chongqing), to Qingdao and to the provinces of Jiangsu, Hainan and Guangdong ex-Shenzhen.

A PBOC report of February 2021 noted that the QDLP quotas for Shanghai and Beijing, and the Shenzhen Qualified Domestic Investment Enterprise programme quota were each increased to US$10 billion in 2020.

Even though more cities and provinces have received approval to set up QDLP schemes, Cerulli Associates senior analyst Ye Kangting, pointed out that “foreign managers prefer setting up their onshore entities in financial hubs like Shanghai, due to its established ecosystem and infrastructure”.

On the other hand, she agreed that those cities which have been relatively more generous in handing out QDLP quotas could equally be attractive to “foreign managers who have yet to set up their onshore entities to launch QDLP products targeting HNW clients and institutional investors”.

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