The pandemic has forced investors to look closely at their portfolios to not be hit by market volatility, however high net worth individuals (HNWIs) in Hong Kong are still positive on traditional assets.
Quilter International surveyed 51 Hong Kong HNWIs with at least $3m (£2.41m, €2.66m) in investible assets and found beside cash, they predominantly hold stocks (96%); fixed income assets (86%) and real estate (76%).
Of the non-traditional asset classes, just under half (49%) invest in private equity; 47% in lifestyle investments (art, wine and classic cars), 45% in hedge funds and 31% in commodities such as gold and precious metal.
There are several reasons HNWIs may choose to construct their portfolios in this way.
According to Quilter International’s research, 69% of these investors are more concerned with wealth preservation rather than wealth creation.
When it comes to succession planning, a vast majority (80%) of HNW donors expect to pass on wealth in the form of liquid assets (cash and investment portfolios), with under half (41%) expecting to pass on illiquid assets (property and jewellery).
Methods used to facilitate the passing on of wealth include using trust structures (66%) and life assurance products (59%).
Shine a light
Mark Christal, Hong Kong chief executive of Quilter International, said: “The results of our research shine a light on the investment portfolios of Hong Kong’s HNWIs.
“It is interesting that their portfolios seem to reflect their attitude to risk, wealth preservation desires and long-term succession planning goals.
“This type of investor is typically internationally mobile due to them travelling frequently for their work and may also send their children to places like the UK, USA and Australia for overseas study.
“While there may still be some home region- bias in their portfolios, their exposure to international markets often results in a global portfolio comprised of various overseas assets.
“Based on our experience in servicing HNWIs, this type of international exposure or offshore investing is very common, yet many HNW investors may under-estimate the implications of the direct ownership of assets in different geographical locations to where they are resident or domiciled.
“This is because these assets, called situs assets, can create a potential inheritance and estate tax liability in the country where those assets are situated. This is particularly true for investors holding assets in places like the US and UK.”
Elsewhere in the space, private equity whisky fund Rare Single Malts has started capital raising in Hong Kong.
The fund is also available to investors in Singapore, Malaysia, Taiwan and selected parts of Europe.
The initial fundraising will focus on HNWIs, family offices and boutique institutional investors with the first close due 31 July.
It hopes to raise £20m ($24.8m, €22.06m), with a minimum subscription of £100,000.
Turning to alternatives
The strategy provides access to mature and rare single malt scotch whisky assets.
It will primarily target rare whisky casks that are between 15 and 40 years old, as well as bottles and collections of at least 30 years and 18 years of age, respectively.
“Faced with extreme market volatility and a prolonged global recession, investors are turning to alternative assets such as whisky to weather the storm,” Murray Holdgate, general partner of the fund.
“Whisky is fast becoming ‘liquid gold’, reflecting its growing status as a collectible asset that appreciates strongly in value due to its rarity.”
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