Agile business entrepreneurs that successfully generate substantial wealth through their companies are not always so nimble when it comes to diversifying their personal wealth or reducing their exposure to financial risk in the event of a business slump or market downturn.
According to Kenneth Ho, head of products for Julius Baer in Asia-Pacific, a growing number of Asia's wealthy business owners have a high proportion of their wealth tied up in their own businesses which prohibits them from lessening financial risk or seizing opportunities to develop a diversified investment and wealth management portfolio.
He says business entrepreneurs are often too involved with building their companies and managing their day-to-day operations to manage their personal finances. In other cases, company founders have taken their businesses public, which means their personal wealth is linked to the fluctuation of share prices.
'We are not talking about the owners of blue chip companies, but the numerous founder-owners of enterprises in the Greater China region that have accumulated worth of US$150million to US$200million,' Mr Ho says, adding that these companies often have low liquidity which hampers their owners' chances of diversifying the scope of their investments.
He says having more funds to invest means that clients have the ability to increase the size of, or range of, shares in their portfolio. Cash extracted can be used to buy more shares or used for other investments to diversify their portfolio, and by investing in a broader range of asset classes investors can spread their exposure and reduce their risk.
'The underlying priority for structured derivative solutions is controlling the volatility and returns, while adding additional returns to a portfolio without adding a significant amount of risk,' says Mr Ho.