The fund selection process at Indosuez Wealth Management is a global team effort, according to Arjan de Boer, head of markets, investments & structuring, Asia at Indosuez Wealth Management
Professionals from throughout the world are involved in the process, including conducting due diligence, quantitative screening and analysis, as well as meeting individual portfolio managers.
“We cannot underestimate the importance of product specialists, especially those with local knowledge of an asset management house,” said De Boer (pictured), who leads the regional investment strategy and is responsible for the full products and services offering in Asia.
Once an asset manager is given global approval, then country and regional offices have more discretion as to whether to select a fund.
“For example, clients often have a home bias, so in Hong Kong they might prefer larger allocations to Hong Kong and China funds,” De Boer said.
Indosuez has approved about 45 external asset managers in Asia, ranging from specialist boutiques to large global fund houses, and has a platform of around 145 funds.
“Of course, our clients also have access to the asset management business of our parent, Credit Agricole, the ninth biggest bank in the world by total assets, which has a stable of ESG products,” he said. Indosuez WM also cooperates with Amundi, one of the leading European asset managers, which provides ESG scores which help the firm assign an ESG rating to each client’s portfolio holdings.
“But, when we recommend an internal fund to clients, we also offer them an external fund as an alternative.”
Transformational acquisition
A real game-changer occurred earlier this year. Indosuez WM finalised the acquisition of Belgium-based Degroof Petercam, “whose roughly €70bn ($75bn)of assets is transformational for us, giving us around €200bn of total assets,’ said De Boer
Degroof Petercam offers advisory services to high-net-worth clients and families, entrepreneurs and professional investors as well as funds, typically with ESG factors integrated into them.
“The enhanced ESG offering enables clients to meet their growing demand across all asset classes, management approaches (advisory, discretionary) and financing,” said De Boer.
Indeed, De Boer remains an unabashed fan of ESG and its coming resurrection, despite the bad press it has received during the past couple of years.
ESG funds performed poorly in 2022 and 2023, partly because of continued confusion about taxonomies, but mostly because of the surge in energy and defence stocks which was hard for investors to resist.
“However, we are witnessing a massive, multi-trillion wealth transfer in Asia to second and third generations who are more firmly attracted to ESG and impact investment themes,” insisted De Boer.
“Diversity and especially climate sustainability are key concerns, and again we benefit from Credit Agricole’s reputation as ‘the green bank’ in Europe.”
Managing expectations
A graduate of Nyenrode University in the Netherlands, De Boer has been in the financial industry for 26 years, 19 of which have been in Asia. His long career has made him aware both of new trends and overriding constants.
He started at Hollandsche Bank Unie, becoming head of treasury & special products private clients in the Netherlands. De Boer then spent 14 years at ABN Amro Private Banking, with seven of these in Asia, including as regional head of treasury & special products for private banking Asia in Singapore, and then head of private banking for North Asia, based in Hong Kong.
His final stop before joining Indosuez in 2017, was as head of North Asia at ANZ Private Bank before being appointed head of integration for ANZ Retail & Private Wealth Asia in 2016. At Indosuez De Boer was initially based in Hong Kong and subsequently relocated to Singapore in 2022.
Beyond their apparent enthusiasm for ESG investing, De Boer has noticed another differentiating feature of next generation clients.
“They are more willing to delegate the management of their wealth to professionals, which is boosting our advisory and discretionary businesses, as well creating a greater demand for funds (rather than individual securities) and segregated mandates,” he said.
But overall, their central expectations are orthodox, and dependent on where they are positioned in the investment life cycle. Early-stage investors focus on accumulation so capital gains are paramount, whereas more established (and professional) clients value capital preservation and generating stable income.
Achieving those objectives has been difficult for all wealth managers, as they cope with geopolitical risks, economic instability, and the alternating fears of inflation and recession.
“Clients were licking the wounds after the 2022 debacle, and they rushed to the haven of cash in 2023,” De Boer said.
A year ago, almost the only products that gained traction were fixed rate deposits. Now, clients are re-balancing their assets and find value in yield generating products, and especially private markets.
“They have been much more receptive to allocate to riskier assets — although the first step was typically high-quality investment grade bonds — as they see interest rates and yields falling. In sum, they are more optimistic,” said De Boer.
“Clients are less anxious about inflation than recession. Their primary fear is that a stagnating US economy might contaminate the world. However, Indosuez believes that the US economy will be resilient to recessionary pressures,” said De Boer.
In this environment, De Boer advances three main themes, from which derive his favoured investment strategies.
Asset allocation
First, he expects resilient but slower growth with disinflation, which should support risk assets. Hence, he is slightly overweight equities – which also tend to perform well in presidential election years – and he likes European stocks, with a tilt towards defensive sectors such as utilities and healthcare.
Second, he believes US accommodative monetary policy is here to stay for some time; beneficiaries of interest rate cuts include property, and small- and mid-cap stocks.
“Also, it’s not too late to lock in yields paid by high quality, low duration corporate bonds,” De Boer said. He also favours high dividend-paying funds comprising top quality companies.
Private markets also offer opportunities to lock in yields (credit) or generate high returns (equities). Indosuez WM began its private markets business in 2001, and now manages over €10bn in private assets, overseen by 40 professionals worldwide,
“The products encompass the full menu of direct co-investments, secondaries, private credit and real estate and semi-liquids,” De Boer said.
“Our evergreen fund has been especially popular and has performed well.”
Third, he fears there will be an intensification of geopolitical turmoil, which leads him to reduce large-cap exposure, and lean towards value stocks rather than growth stocks – although the “magnificent seven” tech stocks remain in Indosuez WM’s main funds.
“In this unstable environment the US dollar is the best currency to hedge those risks,” said de Boer.
Elsewhere, he is “mildly positive” about Japan because of continued corporate governance reforms, although the yen’s volatility is a problem. Among other stellar performers this year, de Boer believes India stocks are over-valued.
Meanwhile, despite the recent rally, China stocks are still trading below pre-covid levels, he noted.
“Valuations are appealing and emerging market fund managers are generally underweight China equities compared with their benchmarks, so there are likely to be inflows,” he said.
Yet, he warned that investors should be cautious and expect further volatility as China’s policy makers confront substantial structural problems that need to be rectified.
