Wealthy individuals in the Asia Pacific region are increasingly diversifying their portfolios to hedge market volatility, a recent study by Lombard Odier found.
In times of uncertainty, 70% of Singapore’s high net worth individuals (HNWIs) have increased the diversification of their portfolios over the past two years, while 56% of their counterparts in Hong Kong have done the same.
Yet, Hong Kong-based investors demonstrated a more conservative tilt, with 52% of them responding that they have increased their allocation to safer assets such as gold and cash, while 60% of Singaporean investors tried to seek returns from alternatives, such as private equity and real estate.
Moreover, as the stock market has become volatile in the wake of the pandemic, 50% of the Apac investors surveyed expressed concerns over the performance of their portfolios and 35% of the surveyed Hong Kong-based investors have decreased their allocation to listed equities, the study found.
Vincent Magnenat, limited partner, global head of strategic alliances and Asia regional head at Lombard Odier, said: “We are in the midst of a fundamental shift in our global economy pegged with an outlook that is uncertain and gloomy.
“Apac investors are becoming more conservative in their portfolio construction and are diverting to ‘safer’ alternative and private assets, whilst increasingly diversifying beyond their local markets. Above all, risk assessment and management take priority. This is where a robust portfolio construction process from private banks comes into play.”
Global diversification
The study also found that wealthy Apac investors are increasingly exposed to the global market compared to their domestic markets.
Singaporean HNWIs were seen diversifying from their domestic market the most, with close to 60% of them holding less than one-fifth of their portfolio in their domestic market.
Some 33% of Hong Kong-based HNWIs are holding less than a 20% weighting domestically on the other hand.
The private bank said: “This delivers the message that banks need to provide access to a global offering locally.”
Digital assets
Despite gaining traction globally, Apac investors are still reluctant to invest in digital assets such as cryptocurrencies and non-fungible tokens, the study found.
Currently, 41% of Hong Kong-based HNWIs and 56% of Singaporean HNWIs do not hold any digital assets in their portfolios.
In both jurisdictions, only around 20% of the individuals intend to increase their allocation to digital assets.
Sustainability
The study found that Singaporean investors are more value-driven when it comes to sustainable investing, with close to 60% of investors indicating that the “desire to make the world a better place” is their top motivation.
Generally, Apac investors, especially Hong Kong-based investors, are more returns-driven, with 42% of investors in the region engaging in sustainable investing because “it will lead to superior investment returns”.
Lombard Odier’s Magnenat added: “With HNWIs now thinking about sustainability in terms of genuine risk assessment, this confirms that sustainable investing is evolving positively. We will no doubt start seeing more of such investments appearing in portfolios going forward.”
Lombard Odier conducted a study with over 450 individuals domiciled in Singapore, Hong Kong, Japan, Thailand, the Philippines, Indonesia, Taiwan and Australia, who have a minimum of $1m (£870,000, €1m) of investable assets domiciled in the region.
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