Hong Kong’s rich turn to alternative assets for diversification, returns after stocks and property underperform: survey

Nearly 90 per cent of the high-net-worth investors in Hong Kong intend to increase allocations to alternative assets in pursuit of greater diversification and returns, according to a survey by Endowus.

Investors have “reestablished” their view that bonds are an important component in diversified or income-generating portfolios after the US Federal Reserve raised interest rates 11 times from 2022 to 2023, the digital wealth adviser said in its inaugural Private Wealth Insights report published on Wednesday.

“The propensity to look at alternatives, specifically private markets and hedge funds, is very, very high,” Gregory Van, CEO of Endowus, said in an interview. “Investors want to increase exposure to different sources of returns. There is a huge universe of companies out there that are only accessible in private markets.”

In the survey of 492 wealthy investors roughly split between Hong Kong and Singapore, 87 per cent of Hong Kong respondents intend to increase their allocation to alternative asset classes, including private equity, private debt, hedge funds, private real estate and infrastructure. That compares with 58 per cent in Singapore.

Investors who intend to increase their allocations in public markets such as bonds and equities accounted for 30 per cent and 42 per cent of the respondents in Hong Kong and Singapore, respectively.

This increasing emphasis on private markets is driven by Hong Kong wealthy investors’ top financial concern: the need for greater diversification of their investment portfolios.