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Five facts private bankers should know this week

This week we look at hedge funds, top AUMs, digital adoption, the investment case for Europe and green bonds

1. Top 25 firms manage $16.2 trillion HNW assets

Assets under management (AUM) at the top 25 global wealth managers grew 17% on average this year, finds Scorpio Partnership’s 2018 Global Private Banking Benchmark.

This means the top 25 operators which includes UBS, Morgan Stanley, Bank of America, Wells Fargo, Citi, BNP Paribas, HSBC and China Merchants Bank, among others, now collectively manage $16.2 trillion.

Favourable market conditions in 2017, resulting in additional new assets from new and existing clients, was the key growth driver.  

On average, the contribution of net new money to AUM, which was flat in 2016, rose to 4.3% in 2017 for the 25 private banks, Scorpio Partnership said.

This compared to global peers, Asia’s wealth managers achieved the most significant gains. The average AUM growth was 15.2%, compared to 7.5% among European operators and 13.8% among firms based in the Americas.

New entrant Bank of China stood out by reporting double-digit growth for a second consecutive year.

 

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1. Top 25 firms manage $16.2 trillion HNW assets

Assets under management (AUM) at the top 25 global wealth managers grew 17% on average this year, finds Scorpio Partnership’s 2018 Global Private Banking Benchmark.

This means the top 25 operators which includes UBS, Morgan Stanley, Bank of America, Wells Fargo, Citi, BNP Paribas, HSBC and China Merchants Bank, among others, now collectively manage $16.2 trillion.

Favourable market conditions in 2017, resulting in additional new assets from new and existing clients, was the key growth driver.  

On average, the contribution of net new money to AUM, which was flat in 2016, rose to 4.3% in 2017 for the 25 private banks, Scorpio Partnership said.

This compared to global peers, Asia’s wealth managers achieved the most significant gains. The average AUM growth was 15.2%, compared to 7.5% among European operators and 13.8% among firms based in the Americas.

New entrant Bank of China stood out by reporting double-digit growth for a second consecutive year.

 

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2. Digital adoption boosts business growth

Credit Suisse’s Digital Private Banking platform is one of the key enablers of its business growth in Greater China, according to Francois Monnet, head of Greater China and chief executive of Hong Kong.

Monnet said in 2017 the group’s Greater China private banking business grew robustly with assets under management (AUM) and revenues increasing more than 20%, with profitability more than doubling year-on-year.

Credit Suisse was one of the early movers in embracing digital innovation when it first launched its digital private banking solution in Singapore in 2015, followed by Hong Kong in 2016, Thailand and Australia in 2017.

Earlier this month it made the automated account aggregation platform and reporting solution, Canopy, accessible to its Hong Kong booked clients through its Digital Private Banking platform.

Singapore-based financial technology company Canopy, in which Credit Suisse is an equity partner, offers digital solutions specifically for high-net-worth induvials. Its namesake product was first rolled out to Credit Suisse’s Singapore booked clients in 2017.

The larger segment such as ultra-high net worth clients and family offices in particular found the product to be especially useful for their accounting, the Swiss lender said. 

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3. Investment case for Europe

After three years of decline, investors from around the world are bullish on Europe and invested more than ever in 2017 despite geopolitics concerns, a new study by EY has revealed.

Last year, Europe attracted a record level of foreign direct investment (FDI) with 6,653 projects. The UK attracted the majority of inbound investment, followed by Germany, France, Netherlands, and Russia, in the top five. 

Among all European countries, Serbia, which joins the rankings for the first time, recorded more than 150% growth year-on-year.

‘With China’s rise to the number two spot for investment and protracted Brexit negotiations between the UK and mainland Europe, governments in Europe need to remember that it’s the relative attraction of the whole that keeps investment momentum into Europe and it’s not a zero-sum game,’ said Andy Baldwin, EY EMEIA area managing partner.

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4. MAS in the news

The International Finance Corporation (IFC) and the Monetary Authority of Singapore (MAS) signed a memorandum of understanding (MOU) to accelerate the growth of green bond markets in Asia.

Under the MOU, the duo plan to enhance the knowledge of professionals working on green finance issues through capacity building programmes, and promote the use of internationally recognised green bond standards and frameworks.

‘Green bonds are gaining traction in Asia,’ said Ng Yao Loong, assistant managing director, development and international group, MAS. ‘The region now contributes about a quarter of global green bond issuances annually.’

In 2017, green bond issuances in Asia reached $129 billion, posting a solid 45% year-on-year growth. 

In an interview with Citywire Asia this February, BNP Paribas Asset Management's environmental, social and governance integration and sustainability investment specialist Paul Milon said by far, China remains the main Asian country for green bonds, mostly through onshore issuance in renminbi.

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5. Asian hedge fund fees are falling

Hedge fund managers are being forced to break away from the ‘two and 20’ tradition and look at new fee models.

According to alternative investment research firm Eurekahedge, average management fees for Asia-focused mandates have fallen by 35 basis points to 1.25% since 2006, and performance fees fell to an average of 15% in 2017.

‘With more pressure coming from the growth in passive strategies and alternative risk premia strategies, I wouldn’t be surprised if within the next decade or sooner, “one and 10” could be the new norm,’ said Mohammad Hassan, head analyst for hedge fund research and indexation at the firm.

The executive noted that in the past five years, fixed income hedge fund strategies in Asia have tended to charge the lowest fees, close to the ‘one and 11’ structure.

Meanwhile, specialist, illiquid strategies such as distressed debt are continuing to charge the typical ‘two and 20’ model. Commodity trading advisors and macro strategies are also on the lower end of the fee spectrum.

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