Private banks are lacking direct access to early-stage private deals and direct investment opportunities, says Hanzi Ding, CEO of BIL Wealth Management.
Mainland Chinese family offices don’t necessarily examine cyclical or secular investment themes as their first priority nowadays. And not all of them are clamouring for the next unicorn social media IPO.
Rather, some of them appear to be driving wealth management and investment banking service channels to see the broadest possible array of alternative asset deals, funds and vehicles.
Hanzi Ding, CEO of multi-family office BIL Wealth Management, said asset custody, investment advice, broad access to traditional asset classes like listed stocks and mutual funds and to some degree alternative investments are commonly offered by private banks - but key elements are still missing.
‘Traditional private banks in Asia do not provide clients with interest aligned solutions; they only promote their in-house products and often these so called holistic solutions are skewed and biased towards what they can offer only,’ Ding told Citywire Asia.
He said ‘they lack direct access to early-stage private deals and direct investment opportunities, whereas external asset managers and multi-family offices can leverage their own network to find these deals and can make decisions to invest in a relatively short time frame.’
Other financial advisors specialising in mainland family or multi-family investment operations also confirmed that the level of sophistication and demand by Chinese investors to seek higher returns by taking direct investment risks has been emboldened by the parade of high profile, multi-billion dollar tech IPOs.
They even lament that some of them seek pre-IPO deals as if they are a sustainable investment class by themselves compared to the laborious process designing and executing disciplined bottom up or top down portfolio strategies.
Yet, the underlying desire to participate in alternative asset deals remains strong and financial institutions that can address it will find a competitive advantage. ‘Private banks will always have their own team of relationship managers,’ Ding said. ‘But the resources allocated to external asset managers, multifamily offices are not comparable to what is available for the in-house RM. So the RM should really have access to more products.’
The challenge that everyone alludes to is that current financial regulations require that all alternative asset products must be vetted and approved by a financial service provider’s compliance and legal departments. Private banks generally state that they rarely approve for marketing, first time alternative asset funds featuring new management teams. And clients must demonstrate enough understanding of financial risks before RMs can sell them these kind of funds.
'We presently see that most Chinese family offices are now domiciled offshore in Hong Kong or Singapore,’ Ding said.
‘Chinese families typically have a much larger portion of their wealth in onshore China, so there will be growing demand for a combined onshore and offshore investment management that looks at the overall wealth of the family,’ he added.
‘A key advantage for advisers will be to offer expertise on both on-shore and off-shore regulations.’
Virobel Wealth Management AG seeks to work and serve Mainland Chinese high-net-worth individuals requiring single family office establishments. If you would like to learn more about how we can help you. We would be delighted to hear from you and learn more about your situation.CityWireAsia Source