The ongoing tariff war between the US and China requires a renewed focus on portfolio diversification, according to Lee.
“Diversification over bonds, equities, cash and gold, and spread globally and across sectors, would be prudent,” he told FSA.
He favours exposure to low-volatility equity funds and floating-rate instruments. Depending on the investor’s profile, his team is also looking at alternatives, including private equity and Ucits liquid alternatives.
In the alternatives space generally, which promises low correlation to equities, Lee said that real estate-based private equity funds investing in Japan, the US or even a specialised theme like student accommodation, are worth considering.
The risk/return ratio is a guiding parameter for funds that are selected for the platform, he added.
Also with alternatives, fee and compensation structures are often different from traditional products. However, Lee said the team is following the Hong Kong Securities and Futures Commission’s new transparency requirements, which come into effect in November.
The new rules, among other things, require front-line staff to disclose monetary benefit on a product basis.
Across the region, the bank’s fund advisory team works closely with the fund selection team of six (five based in Singapore, one in Hong Kong).
Sometimes communication flows the other way, as when relationship managers come back with client demands for specific products that are not yet on the bank’s platform.
“At the start of this year, investors were asking for robotics or artificial intelligence (AI)-oriented investments,” said Lee, adding that the fund selection team decided that funds with these specific tech themes were not necessary to have on the platform.
Because global technology companies are also operating in the robotics/AI area, a diversified technology fund would provide exposure to these themes, he explained. Also, such funds are more broad-based and have a longer track record that should shield investors from undue risk.
Not all thematic funds are avoided, however. Lee said that as long as a themed fund has, in the bank’s view, long-term investment sustainability, then the product is a candidate for the platform.
As an example, he said ESG-themed funds are among the bank’s offerings.