Proctor this year relocated to Singapore from Citi Private Bank in London to take on the role previously held by Roger Bacon, who was promoted to head of managed investments for the region in April.
Based on Proctor’s client conversations in Asia, product demand underscores the hunt for returns in a low interest rate environment.
“Investors are struggling for returns in this market, and are looking to fixed income to deploy capital. They worry that equity markets are at all-time highs,” he told FSA.
“We are broadly of the view that equities, especially those in the emerging markets, are of better value at the moment than fixed income.”
India equities are one area where the bank would like to increase client exposure, he said. India’s structural reform progress, economic growth and young demographics are creating attractive investment opportunities.
Themed funds are also popular with Citi’s clients, Proctor said.
“Clients very much like themes, such as robotics, healthcare or technology. Tech is in the news every day and investors can see value in a long term trend like robotics and healthcare. Current equity interest from clients is not in large developed market funds, but is instead on much more focused thematic funds.”
This year, investors have been warming to hedge funds, which have been unpopular in Asia the last few years, he said.
“Hedge fund performance has typically been poor over the last couple of years and the costs, in this low interest rate environment, are very hard to justify.
“The last 2-3 months we’ve seen a significant change with clients being far more active in this asset class. They are concerned about the level of the equity markets but they want to stay invested and reduce their downside exposure.”
Other alternatives are also popular. There is demand for private equity and real estate, particularly individual property deals, Proctor added.
“Clients are interested in specific ideas where they see value. Buying a US long-only fund, there is zero interest in that. Markets are at high levels. When you have high returns, people get nervous and start taking beta off the table.”
Higher risk appetite
Proctor, who has been with Citi Private Bank in London since 2008, said his initial impression is that Asian clients have a higher tolerance for risk than the clients he worked with in the UK.
One key difference is in the tax regimes, which drives different investment behaviour. In Singapore and Hong Kong, the tax regime is 15%-22% compared to London at 47%. In addition, Hong Kong and Singapore have zero tax on investments.
“My initial impressions are that clients in Asia typically have a higher tolerance to risk than the clients I worked with in the UK. A 6% return which many clients in the UK would be happy with probably won’t appeal to clients in Asia as they are often seeking double digit type returns.”
Asian clients are far more willing to use leverage to get high returns than clients in the UK, who seldom use leverage, he added.
He said the challenge in Asia is to work with clients to broaden their portfolios, move away from a trading mentality and diversify their investments.
“There’s been a long bull run and we are at all-time highs. Talking to clients about diversifying now is not easy but it is a topic we look to continually work with clients on.”
