High-net-worth individuals are more savvy

Retail and high-net-worth investors are again opening their purse strings, emboldened by a slight improvement in the economic and investment environment. But the lessons learned from the global financial crisis mean that private wealth management has become increasingly important.

Investors are more aware of what they are holding in their portfolios and what returns they stand to get in the near and long-term.

'People are no longer passive when it comes to knowing investment products,' says Eric Ng, managing director of Convoy Asset Management. 'They do not solely rely on their financial advisers to provide them with the necessary information concerning their investment portfolio.'

The convenience of researching and comparing investment products online has made it easier for investors to rely on themselves rather than promotional information.

This has led to investors starting earlier in building up their portfolios and showing great interest in understanding the various investment tools.

However, professionals urge investors to seek advice from those in the sector since there is an overload of information.

'Investors realise it is necessary to have professional advice when it comes to comparing the different products available and selecting the most suitable ones,' Ng says.

Starting an investment portfolio involves less capital than what is needed for buying property in Hong Kong, and has attracted an increasing number of young people in recent years. Ng says: 'An investment product or savings can accumulate wealth, but with the real estate market, people may have to invest in luxury properties to gain a higher return.'

The investment market in Hong Kong is considered mature, but previous market crashes have altered people's perspectives, helping them realise the need to diversify their portfolios and classify investments into long-term and short-term ones.

'We are seeing an attitude shift,' Ng says. 'Investors are beginning to see the need for incorporating long-term investments like real estate investments, short-term investments in equity, and keeping a plentiful amount of cash, and invest in mutual funds and other investment vehicles.'

As awareness in the need for diversification increases, investors are also exploring new opportunities.

Elaine Wong, head of advisory and sales at Credit Suisse Private Banking, says investors face two major problems. The first is the macroeconomic uncertainty, while the second is near-zero interest rates in Europe and the United States, she says.

'These two problems pose a difficult dilemma,' Wong says. 'The macro uncertainty makes investors reluctant to commit cash to equities, and yet the near-zero rates imply a miserable return on cash and safer fixed-income instruments.'

Credit Suisse Private Banking suggests clients should gradually build a strategic overweight position in equities for the next six to 12 months, while exploring other investments that can generate worthwhile returns.

The bank advises investors to look at areas such as convertible bonds and high-dividend equities.

Credit Suisse suggests looking at bonds in emerging local currencies and from blue-chip banks in the US and Europe.

When it comes to investing on the mainland, long-term, investors are offered many opportunities.

Most mainland funds have picked constituent stocks in the Morgan Stanley Capital International (MSCI) China Index. 'There is a large potential in the mainland market and people need to explore new investment and development opportunities rather than rely on stocks of the MSCI China Index since they may not accurately reflect the actual economic growth potential of the mainland,' Ng says.

To widen the choice for retail investors, Convoy Asset Management has partnered Zeal Asset Management to launch the Voyage Zelec China Fund. The fund primarily invests in stocks listed in Hong Kong with a China focus, and B-shares listed in Shenzhen and Shanghai, with growth potential guided by a value investing philosophy.

The fund does not follow any indices, but uses a disciplined value investing approach.

Professionals at Convoy will investigate unconventional stocks of high quality that may be overlooked in the market through company visits and on-site evaluation.