Time comes to play it safe
Investors are turning to ETFs and bonds in a volatile climate, writesJohn Cremer
Asian investors, who hoped the 2008 meltdown would be just a "normal crisis", like the others of the previous decade, have learned that recent history is not always the best guide.
Bouncing back this time requires considerably more than a bit of belt-tightening and a few quick fixes. At the policy level, as Europe's leaders continue to prove, no one knows quite what to do. As they feel their way through uncharted territory, it has become clear to many high-net-worth individuals that only one investment strategy makes much sense: playing it safe.
"The shift in attitude among our clients, which began in 2008, is continuing," says Bassam Salem, CEO of Citi Private Bank for the Asia-Pacific. "They are still focused on reducing risk, improving yield, increasing transparency and improving liquidity."
Risk appetite may not have vanished completely. In most cases, though, it is firmly under control. The one-time level of interest in things like complex accumulators, high-concept internet stocks and currency plays in Brazil has mostly faded to a hazy memory.
Instead of just taking a punt as they might once have, clients now typically ask more questions about products and expected proceeds, and thoroughly examine the risk profile of personal portfolios.
"They not only want more detail about the overall structure of an investment product, but also probe for more information about the various constituents," Salem says. "Clients are now far more diligent about how they invest. This 'behaviour' can be traced back to the crisis, but ongoing uncertainties about Western economies and concerns over growth in China serve to strengthen such attitudes."
Partly in response to this, the bank launched its own "investments lab" in Asia in 2010. Its main purpose is to provide targeted analysis and specific advice for ultra-high-net-worth investors. Many of them have benefitted from Asia's increasing wealth and, in the current climate, are concerned about aspects of wealth preservation more than performance stability.