Structured products are still one of the most popular investment vehicles among the ultra-high-net-worth investors (UHNWIs), but the lessons from the 2008 financial crisis have prompted them to diversify their investment portfolios and go for simpler structures, according to UBS.
The Swiss bank teamed up with specialist consultant Wealth–X to produce the Wealth–X and UBS World Ultra Wealth Report 2014 which was released on 19 November. The report analyses the global wealth segment by geographic, gender and sources of wealth.
According to Amy Lo, head of UBS wealth management Greater China, structured products are still one of the “frequent candidates” in an average UHNW investor portfolio despite their popularity being challenged by other alternatives.
“After suffering loss from complex financial products in the financial meltdown, many UHNWIs prefer products with simple structures that make economic sense to them,” she said during the media briefing to launch the report. “Also, UHNWIs have realised that it is not smart to put all the eggs in one basket [and they] come to us asking for more diversified investment allocation including bonds, equities, funds and even real estate.”
Lo mentioned that UHNWIs are more concerned about the nature and prospect of industry segments rather than the kind of instruments available. “Judging from the demand received from clients, they are currently more interested in technology, health care and property sector,” she said. “UBS has an open – architect structure and we are able to provide clients with a series of different instruments all under one investing theme.”
Low-yield environment
Yonghao Pu, regional chief investment officer of North APAC at UBS explained that beyond the need for a diversified exposure, UHNMIs are also adapting quickly to the current low-yield investing atmosphere with more realistic perception on risk and return.
“Before clients were expecting an annualised return as high as 20% to 30% at the height of the global equity bull run,” he said. “They have now realised that high returns will come with high risks and have lowered down their expectations accordingly.”
According to the report, only individuals with assets of more than $30m fall under the UHNWI category. There are 3,335 UHNWIs in Hong Kong, up by 155 people from last years’ figure.
Hong Kong ranks the fourth among Asian countries and 13th globally in terms of UHNWI population. Among the UHNWI in Hong Kong, more than 25% of the population are female, which is 13% more than the global average.
The report also shows that only 55% of UHNWI in Hong Kong are self-made, which is 9% lower than the global average. The rest of UHNWIs inherited their wealth from their parents.
Wealth-X is a consulting firm providing information about UHNWI individuals, headquartered in Singapore.
Click here to read the full report.
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