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The super rich: what they want from investments
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THE rise of Chinese super rich has captured worldwide attention, especially at banks and funds eager to manage all those assets.
China was home to 157 billionaires last year, second only to the US, according to the Wealth-X and UBS Billionaire Census 2013. Their average net worth was US$2.4 billion, with liquidity of 10 percent.
“In China there is an increasing trend of wealth transfer from first to second generation,” said Amy Lo, chief executive officer of UBS Wealth Management Hong Kong and chief executive of the UBS Hong Kong branch.
“They are overseas educated, so they are more receptive to global investment opportunities and more diversified portfolios,” Lo said. “Although some are interested in non-traditional sectors such as new energy, the environment and information technology, wealthy Chinese still prefer investments in tangible assets such as property.”
Lo is responsible for UBS wealth management in Hong Kong. Prior to her current role, she was the regional head of Ultra-High Net Worth and head of the Global Family Office for Asia Pacific.
Lo talked with Shanghai Daily at the UBS Family Legacy and Philanthropy Forum in Shanghai about the investment appetite of China’s super rich.
Q: What are the preferences of the wealthy in asset allocation?
A: In general, they will be more interested in looking at asset allocation and diversification in difference asset classes. They are also open to looking at alternative investments like hedge funds and private equity. And more and more, they also favor tangible investment asset classes like property. In recent years, some ultra high net worth mainland clients have asked us for help in looking for property investment opportunities outside Asia — for example, in Europe, the UK, and New York. They are also interested in deal opportunities, such as joint partnerships with overseas companies or doing acquisitions.
Q: How is the risk appetite of wealthy investors?
A: In the past, Chinese mainland wealthy investors were more aggressive than their Hong Kong peers.
But since the financial crisis, we have noticed that they are becoming more cautious and more realistic in their expectations toward investment returns. They have started to understand the need to diversify, or not put all their eggs in one basket. They also realize the importance of proper risk management. That’s the reason why we have been seeing increasing interest in setting up family offices to professionalize the management of their assets.
Q: What are differences between wealth management for wealthy clients and ordinary retail investors?
A: The concerns of ultra-wealthy clients are investment, business and family. They are looking not only for investment advice, but more importantly, for help with business and family needs.
On the business front, they are often concerned about corporate activities for their businesses, such as large asset sales, mergers and acquisitions, initial public offerings and other large capital-raising activities. On the family side, wealth succession and philanthropy are two key areas. In Hong Kong and China’s mainland, a lot of wealthy now are in the first and second generations. So preserving capital and effecting a smooth transfer from one generation to another is very important.
Q: How prevalent is family philanthropy in China?
A: In the mainland, philanthropy is gaining momentum. I must say I respect very much rich entrepreneurs in the region who ask us to help them to look at ways to contribute something back to society. We are also seeing this sentiment among the younger generation, which is very exciting. Once you engage the young, you can also get parents on board.
Q: What are major motivations of rich Chinese people to contribute to charities?
A: They want to give something back to the society that enabled their success as entrepreneurs. Many experienced hardships when they were young. A lot of them are passionate about helping in areas such as education and healthcare.
Another motivation is to create a positive family legacy, and philanthropy is one way to do that. At UBS, we’ have been running family roundtables where we invite the whole family to sit down and discuss family values.
We also have a small number of clients who do charitable contributions for more commercial reason.
We have been advising people running family business about how they can use philanthropy to operate the company better from a social responsibility angle.
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