“The high yield cycle has already had a good three-four year run. Even now you still have managers coming out with high yield products again. While it is understandable from a business development standpoint for the fund houses, I am not sure that the timing is always in the best interest of investors,” Tan said in an interview with Fund Selector Asia.
Furthermore, she believes the industry is becoming more “homogenous”.
“It is getting tougher to differentiate [product offerings] from managers and advice from different advisors.”
Another challenging issue is regulatory changes. Regulators are tightening compliance screws on all banks, particularly in the “know your customer” area.
“The regulators are getting more focused in terms of client profiling and product risk determination, to ensure you are providing the right products for the right clients.”
Fund selection process
Deutsche Asset and Wealth Management’s due diligence and fund selection team are based in both the US and in Europe.
Tan’s team in Asia focuses more on the advisory aspect of managed investment solutions.
The team begins by identifying the needs of clients in terms of their liquidity needs and risk-reward profile. Then they turn to the relevant investment themes.
“Our top-down chief investment officer provides views that help us in identifying themes and our multi-asset group provides us with recommended allocations for a diversified portfolio across equities, fixed income and real assets.”
Taking these views into account, the team would then advise clients on their portfolios with a view to each client’s individual constraints, and recommend asset allocation.
In selecting funds, her team looks at whether the views of managers and their clients’ portfolio positioning are aligned, which results in a narrowing down of the fund choices.
The global fund selection team maintains an approved list of more than 400 mutual funds and liquid alternatives funds collectively for the global wealth management platform.
The Asia approved list of funds is close to 200. From this Asia list, Tan’s Asia advisory team then arrives at a focus list of about 20-30 odd funds.
“Our client base typically is quite thematic-oriented. This appeals to them more rather than a traditional asset allocation approach. We try and marry the different requirements in that when we advise our clients.”
See part 2 of the interview, which features Karen Tan’s views on investment and product themes.
