Private banks and wealth managers have seen their asset values and those of their high-net-worth clients plummet because of the global financial turmoil. It has forced them to change the way they invest and make them more risk averse. Investors and private banks are now working closely to preserve capital rather than maximise returns.
According to Nitin Dialdas, senior investment analyst with ING Financial Planning, it is hard to relate to the damage done to portfolios with the Hang Seng Index, for example, registering a 100 per cent-plus rise since March this year.
'Financial stocks are up roughly 250-300 per cent,' he said 'The property market in Hong Kong has risen about 30 per cent this year alone. Across the board we are starting to see gains again. It doesn't matter what assets clients are invested in, it seems that they are managing to make money once more.'
This welcome rebound follows months of downside. High-net-worth investors in Hong Kong were particularly badly hit by the crisis because they invested in more sophisticated types of high-risk products such as accumulators. Accumulators are normally short-term trades - an investor buys equities at a discount and offloads them as soon as they hit target price. But even as the equities were not hitting the target price the accumulator contracts mandated the investors purchase a certain amount of equities.
'Generally, high-net-worth investors are now behaving more cautiously because they have been hit badly. But after every downturn they are cautious for a while, then they forget about the bad times because they start making returns on their portfolios,' Dialdas said.
David Cripps, senior strategic asset adviser for HSBC Family Office Services, agreed that the lessons learned last year were having a positive impact on high-net-worth investors' behaviour.
He said that investors' appetite for leveraged positions, liquidity restrictions, high volatility, or obscure terms and conditions had diminished.