Trends that will outlast the pandemic

COVID-19 has been a scourge in 2020, and continues to be. Yet some businesses including wealth management actually continue to thrive. Last week, Union Bancaire Privee (UBP) released a respectable set of results. Total assets under management (AUM) rose by 5 per cent to 147.4 billion Swiss francs (S$219.7 billion), boosted by net new money mainly from private clients.

In Asia, the combined AUM for wealth and asset management is around US$30 billion.

Wealth sat down with Ranjit Khanna, UBP head of South Asia and Singapore branch chief executive to talk about trends that will outlast Covid-19, and the opportunities for clients in 2021.

Please share with us UBP's growth in 2020 and the outlook you have for 2021

In 2020, we generated material net new money inflows and saw an increase in assets under management in Asia, driven in part by strong interest in our customised offerings for UHNW clients. 2020 was interesting for us in many ways. We had to deal with market turbulence in March, and the onset of circuit breaker in Singapore tested the industry and our resilience and ability to work remotely in an effective manner.

We're proud of our ability to switch so rapidly into a remote format in just a matter of days. What that underscores for us as an institution is that it instilled confidence in us among our clients. And then from the latter part of Q2, the trajectory was extremely strong. Productivity was at an all-time high and the business posted a really strong set of results, which has been rather pleasing to me.

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I'm very optimistic about the future. Advice is something that's always going to be sought after. The history of our organisation is built on the back of solid advice. With the growing affluence in the region, the wealth management industry has a strong future.

Digitisation is a trend amplified by the pandemic. Where does UBP stand in this regard, and how have clients taken to it?

One thing that was amplified in 2020 was the importance of having very strong business continuity plans. For the pandemic to be so prolonged is a real test for organisations and I'm pleased to say I think we came out with flying colours. We were pleasantly surprised at how accepting clients were with this new way of dealing. Certainly, partial telecommuting will be the new wave for all in the industry.

The pandemic has shown us that the digitisation of our industry is not just about building low-touch client friendly systems, but also about ensuring strong IT resilience to support high-touch relationship management.

During the circuit breakers in Hong Kong and Singapore, we had 75 to 80 per cent of our staff working remotely from home. Despite this, the ability to innovate and deliver customised advice to our clients did not take a backseat. Operational resilience during this period has given us confidence not only in our back office but also in our teams.

We continue to invest in further digitisation which will only evolve for the better.

What are you telling clients in terms of the market backdrop and where opportunities lie in 2021?

From a macroeconomic and political landscape, it's a brave new world. There is also a shift from monetary-led policies to fiscal policies. This in itself will bring risks and opportunities for our industry. We believe that the one thing that will help markets is that fiscal activism is here to stay.

With that as a backdrop, there are four themes we have been talking to our clients about. First is active risk management, which will become extremely important in portfolios, particularly in Asian portfolios which have historically been very fixed income-oriented. In terms of protecting the downside, structured products or actively managed hedge funds or option strategies will be very important.

Two, we will potentially see a further weakening of the US dollar. The beneficiaries of that will be precious metals such as gold. Even currencies such as the euro, Swiss franc and the yen will benefit.

Three, transformation-led strategies or companies will benefit. Such strategies are going to play a much more important role in the portfolio. These include fintech, telehealth and biotechnology. The one thing we often talk about is the nervousness about valuations. But I think people need to start looking at tech companies from the long-term investment perspective, and not necessarily expect constant double-digit growth.

Four is China, which is transitioning into an expansionary mode. It is showing strong GDP growth and we believe we'll see further growth in 2021. In our opinion, this underlines the power of the strength of China's domestic economy and domestic appetite.

Valuation is only one lens through which companies are viewed. With the expected strengthening of the economic backdrop in terms of company results, the momentum of vaccinations and a lower interest- rate environment, we believe there is room for companies to grow.

Please share with us more about the initiatives you are making in terms of FX (foreign exchange) and private market offerings.

One of the things we've been doing over the past 18 months is to strengthen our proposition of FX as an asset class which includes flow products. We made great strides in this in 2020. We look at the three Ps which are critical for a successful proposition. The first is people. In this asset class, we have to have subject matter experts. This is for highly sophisticated clients, so suitability becomes very important. Two is the product; you have to constantly expand the product base. Three is process, which is enhancement of direct access because it's so time sensitive, and making sure we have the right tools in terms of straight-through technology, not only to help clients but also from a risk management point of view. We've seen strong growth in this.

Private markets are becoming increasingly important to us because they are increasingly important to clients. Our clients have been requesting for asymmetric strategies that could provide them with yield-based returns or long-term capital appreciation opportunities, but not necessarily in the listed space. We've done such offers for sophisticated clients, where it is suitable for their portfolios. Opportunities include the ability to invest in high-end data centres in developed markets, for instance, which cater to high-tech companies.

Discretionary portfolios are also becoming increasingly important. We have been positioning our discretionary portfolios to look more ''asymmetric'', where we help our client portfolios to maintain protection against downside risks while continuing to capture the upside.

In 2020, thanks to our unique approach in handling the market volatility, the DPM portfolios generated strong outperformance during volatile markets.