Rising inflation and the impact on the economy is the biggest concern to Asia Pacific high-net-worth individuals (HNWIs), although surprisingly higher interest rates was cited as a much smaller concern, according to a study from Lombard Odier.
The Swiss pure-play private bank surveyed 450 HNWIs in Australia, Hong Kong, Indonesia, Japan, the Philippines, Singapore, Taiwan and Thailand and found that 77% of respondents saw rising inflation as the biggest risk.
In contrast, higher interest rates were much less of a concern with Australia (68%) and Indonesia (70%) being the only two markets surveyed where HNWIs cited it as the top risk facing the global economy over the next 12 months.
In fact, geopolitical risk beat it out as the second biggest concern among Asia Pacific HNWIs at 65%.
Unsurprisingly, market volatility was the main concern when it comes to investment portfolios with 50% of Asia Pacific HNWIs worried about its negative impact on performance.
HNWIs from Thailand (72%), the Philippines (62%), Taiwan (55%) and Singapore (54%) are the most worried about market volatility having a negative performance on their portfolio performance.
The other issues flagged received comparatively low scores, for example only 21% are worried about a lack of liquidity. The second highest concern was missing out on opportunities at 32%.
As a result of market volatility, HNWIs have started to diversify their portfolios with 44% of respondents diverting their investments from traditional assets such as equities and bonds towards safer assets, 37% to alternatives and 27% to investing in their own companies.
Crypto not in vogue
One surprising outcome of the survey given the increasing regulatory drive to democratise the trading of cryptocurrencies was the extent to which Asia Pacific HNWIs were disengaged with the asset class.
Overall, 83% of respondents have no crypto investments or it accounts for less than 5% of their portfolio. This trend held up even in crypto-friendly jurisdictions like Japan, which recently became the first developed economy to legalise stablecoins, where 83% also had less than 5% of their portfolio invested in the asset class.
Even more surprisingly, the survey found no significant willingness among HNWIs to increase the weight of digital assets in their portfolios with only 20% intending to do so. At the same time, a third of Japanese HNWIs even intend to decrease their holdings in cryptocurrencies.
In contrast, there is a high degree of interest in sustainable investing with 78% of respondents saying they are interested in such investments. The numbers go as high as 93% in Thailand and 88% in Taiwan. Australia has the lowest score with a third not interested in sustainable investing.
Interestingly, two of the top three reasons for Asia Pacific HNWIs making sustainable investments are not related to philanthropy or morality but because of superior returns. This is especially true in Taiwan, where 65% of respondents think it will lead to superior returns. In fact, Singapore is the only market where HNWIs’ main motivation is still values driven with only 18% citing returns as the main factor.
Lombard Odier noted that this shift in mindset overall across the region from a values-driven choice to a prudent management of a portfolio was an important watershed.