About 46% of Singapore’s millionaires expect to live longer - up to 100 years of age - which is determining their investment behaviour.
The latest UBS Investor Watch survey, covering 415 millionaires in Singapore, found that nearly all high-net-worth respondents have made, or will make, changes to their financial plans to provision for increased life expectancy.
In terms of asset classes, Singapore’s high-net-worth individuals (HNWIs) prefer equities and real estate as the strongest investment opportunities for a long-term horizon of over 30 years.
According to the survey, those aged under 35 and over 65 had the strongest preference for equities. Meanwhile, real estate investments were more attractive for those aged between 35 and 65.
Last year, Singapore was ranked third globally in the World Health Statistics report by the World Health Organisation with an average life expectancy of 83.1 years. The city-state was also expected to have the second best life expectancy in the world in terms of full health, behind Japan.
‘All else equal, a lengthening of the investment horizon calls for a higher proportion of riskier assets such as equities and alternative investments, which would also include non-listed equity and debt as well as real estate,’ noted Hartmut Issel, head of Asia-Pacific equities and credit, chief investment office at UBS Global Wealth Management.
Aside from private markets, UBS expects US, Eurozone and emerging market equities to return more than US inflation, forecast to average 2.3% in 2018-19. The Swiss wealth manager expects US dollar high grade bonds and cash to return less than inflation.
However, the survey found that 40% of the investors in Singapore considered cash as a good long-term investment. ‘Here is arguably an area in need of discussion, as recent decades have shown that cash is not an optimal choice in view of inflation, which sometimes gets forgotten in the investment equation,’ Issel said.
‘While we do not argue for a complete exclusion of cash, its allocation should remain limited, especially if investors believe their horizon is lengthening.’
At a press briefing at the start of the year, Steven Wieting, chairman of Citi Private Bank’s Global Investment Committee also revealed that the bank’s Asia clients were holding an ‘unusually large amount’ of cash in their portfolios - about 25-30% on average. Citi recommends 2% of cash in portfolios exposed to real estate and private equity.
The UBS study found that healthcare and information technology were the most popular sectors for long-term investing by Singapore’s millionaires.
Healthcare insurance companies, biotech and pharmaceuticals were particularly appealing to the respondents, with 54%, 41% and 40% of the respondents currently invested in the sectors. The other sectors of interest were nutrition and wearable technology.
This was followed by the financial, real estate, and consumer staples industries. Singapore’s younger millionaires are particularly keen on the consumer discretionary sector, the report noted.
Hong Kong’s millionaires, in contrast, prefer healthcare and financials, followed by real estate, information technology and consumer staples.