Julie Koo, Citi Private Bank
“China is a key focus market, and for us certainly it is the fastest growing customer base,” Koo said during the Hong Kong Investment Funds Association’s annual conference held this week.
Assets managed on behalf of mainland Chinese clients account for 28.5% of Citi PB’s North Asia AUM. Hong Kong takes the largest share with 56% of the region’s assets.
Citi PB North Asia clients
|
% of North Asia AUM |
% of North Asia # of clients |
% managed investments (mutual funds and discretionary mandates) of total investment AUM |
|
| China |
28.5 |
19.9 |
16.1 |
| Hong Kong |
56 |
56.5 |
27.1 |
| Taiwan |
15.5 |
23.6 |
28.3 |
Source: Citi Private Bank
However, there is no one-size-fits-all model when offering private banking services to mainland Chinese clients, Koo said.
The bank has classified Chinese clients into four categories on the grounds of how they have developed their wealth. These are through technology, real estate, manufacturing and the finance sector.
“Each of these groups have very distinct characteristics and, in turn, their interests when it comes to investing will differ quite dramatically,” Koo said.
Investor types and preferences
For tech clients, which are mostly first generation wealth, they are growth-driven since they have seen how much money their own businesses have made for both their shareholders and for themselves, according to Koo.
In turn, they tend to look for direct investments, particularly in other tech start-ups.
“They like pre-IPO opportunities and they tend to have a home-bias, but if they were going outside of China, the US tends to be a preferred destination.”
She added that these clients also look for more niche and specialised offerings, which include alternatives.
Like the tech clients, those that have developed their wealth through real estate are also mostly in their first generation. However, they tend to be more on the risk-taking side, according to Koo.
“They are much more speculative and they really do like to trade. Most of these clients think they [will move] in or out of the markets in a blink of an eye.”
They also like to hold assets directly, whether they are equities or bonds, Koo said. Investments are usually in areas of the market they are most familiar with.
“That means that when they look at investments, they will be drawn to higher yielding assets like high yield property bonds,” she said.
In addition, when it comes to real estate assets, they have high return expectations, which can be challenging. However, they would sometimes sacrifice some of that return expectation for trophy assets, such as huge buildings in key cities.
“That gives them some bragging rights amongst their peers.”
Delegating portfolio management
Turning to manufacturing clients, Koo said that they are already in their second generation and tend to be conservative and risk-averse.
“Given how hard they have worked for themselves or watched their parents work to build wealth with their bare hands, they tend to be much more focused on capital preservation,” she said. Most of these investors prefer fixed income investments.
Unlike tech and real estate clients, those in manufacturing consider delegating their portfolio management to a wealth manager because they are often busy running their own businesses.
Meanwhile, finance sector clients, which are mostly in their first generation, are very sophisticated investors.
“They’ve often been educated in the top universities in business schools and they have worked for the top local and international investment houses,” Koo said.
Like manufacturing clients, they typically delegate the management of their portfolios to wealth managers as they tend to be busy. However, they set very high standards, both in the kind of assets they invest in but also in terms of client service, according to Koo.
“They will look for unique offerings, so they tend to like getting access to products that they don’t feel anyone can get access to. And these clients will often delegate across a broad range of investment classes, but they will expect high and stable returns.”
Investors working in the finance sector are also more comfortable investing with wealth managers who have a track record rather than a comparatively new manager, she added.
