New Delhi: Wealth managers see greater potential in China than in India and are ready to recommend alternative investments like hedge funds to boost investor returns, according to a survey.
China has the rosiest prospects for any wealth market in Asia, said the poll of 73 wealth managers in Europe, Asia and the United States that oversee more than $5 trillion.
Some 80% of those canvassed in the survey by British investment bank Barclays Capital forecast at least 16% annual growth in the assets run by wealth managers in China. But fewer of the respondents were as upbeat about India, with 60% expecting assets managed by its wealth experts to increase at least 16% annually.
“The overall outlook for wealth generation in Asia is strong while confidence in China is higher than ever,” said Peter Hu, a top investment manager at Barclays Capital.
Barclays Capital forecast economic growth in Asia, excluding Japan, of 8.2% for 2007. China reported 11.1% economic growth in the first three months of the year, and India is expected to grow by around 8.5% in the year to March 2008, down from an estimated 9.2% the previous year.
Asian investors are becoming increasingly “happy to take on non-traditional investments” such as hedge funds, private equity and property, Hu added. Hu said traditional asset classes, like the stockmarket or bonds, are near all-time highs.
“They’re not compensating investors as much as they have before so they’re looking for other kinds of investments to sustain their return profile.” The trend toward alternative investments reflects a rising “level of sophistication among investors in the region” and a higher “level of younger money being made by entrepreneurs,” Hu said.
“They understand risk” and are ready to “look at new ways to gain returns,” he said. “It’s a positive for the region, helping to increase diversification and absorb liquidity,” he added, forecasting that alternative investments will become “mainstream products over the next two years.”
Right now, equity-linked products, or equity derivatives, are the most popular alternative portfolio investments, with foreign exchange-linked products second, the survey found.
“With increased liquidity and transparency, the derivatives market is set to grow,” Hu said. Until a few years ago, it was hard for private Asian investors to buy such products, but investment banks have begun marketing them to retail investors.
The survey found 88% of respondents expect the hiring and retention of staff to be their biggest challenge over the next two years in an increasingly cut-throat market for qualified staff as Asia’s wealth management industry grows.