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Bank of Singapore adds PE to strategic asset allocation

Bank of Singapore adds PE to strategic asset allocation

Bank of Singapore added private equity (PE) to its strategic asset allocation last quarter, Citywire Asia has learnt.

The Singaporean private bank is now recommending a 5% allocation to the alternative asset class for ultra-high-net-worth (UHNW) portfolios that have the ability to take the ticket size and withstand the lack of liquidity.

The decision follows an overwhelming response to previous PE deals that were introduced to clients, chief investment officer Johan Jooste told Citywire Asia, adding that the offerings were oversubscribed each time.

Over the past 12 months, Bank of Singapore has raised $600 million across three funds in collaboration with global private markets managers to provide opportunities for clients to invest in areas such as Europe, real estate and healthcare.

‘We came up in favour of Europe more than US because of lower valuations,’ Jooste said.

‘The economy has a much longer runway of five to seven years forward given how low ECB [European Central Bank] rates were compared to US. At that point, we said okay let's begin a search in that space.’

While the Singapore-based executive prefers geographical diversification, he noted that the opportunity was limited in Asia. He, however, expects this to change over time as PE transforms from an institutional asset class into one available to HNWIs.

‘The other trend is that in the local markets - India, Asean and even China - smaller, more locally-focused operators are starting to enter. For them to get the assets, they want to make the entry-level a bit more manageable for the broader audience,’ he added.

International PE managers are also ramping up their investments in Asia. For instance, Blackstone closed its first Asian PE fund at $2.3 billion in June, bringing the firm’s total investments in Asian equity to $3.8 billion.

The average industry minimum for entry is $10 million with a lock-up period of five years, according to Jooste.

Bank of Singapore will continue to partner with third-party PE fund managers, bringing them onto the product platform, rather than doing in-house due diligence on private equity investments. The bank does not participate in co-investments with clients.

Most private banks and independent asset managers in Asia are recommending increased exposure to PE investments amid low interest rates and volatile global markets. Some banks, such as UBP and Pictet Wealth Management, are even ramping up their PE capabilities through hires.

In fact, a survey of 337 HNWIs conducted by consultancy firm Scorpio Partnership for BNP Paribas Wealth Management found that 50% of the participants were willing to invest at least $500,000 in PE funds this year.

Those active in PE and private real estate funds were willing to hold up to 16.3% of their portfolio in the asset class, making it their top exposure.

Interestingly, the asset class could soon go retail. Earlier this year, Temasek Holdings’ wholly-owned subsidiary Azalea Group listed PE bonds on the Singapore Exchange, opening up the asset class to retail investors in Singapore.

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