News Releases

Short-termism out as investors seek growth, liquidity and diversification in changing markets

Hong Kong – The wealth management industry is set to boom across Asia with revenue growth of more than 15% per annum over the next two years, according to a Barclays Capital survey of Asia’s leading wealth managers who between them have over US$5 trillion of assets under management.

Barclays Capital conducted its Wealth Management survey prior to its third annual Wealth Management Conference in Asia, held in Hong Kong on 18 April. This year’s survey involved 91 respondents from 57 key wealth management organisations from across non-Japan Asia including asset managers, insurance companies, local and global retail banks and private banks.

Growth Potential

Wealth managers expected China to have the highest revenue growth potential in Asia over the next two years, with 80% of respondents anticipating more than 15% per annum growth, followed by 68% of respondents for Southeast Asia - where Singapore is the leading wealth management market. Around 60% of wealth managers expected more than 15% per annum revenue growth from India, Hong Kong and Taiwan, closely followed by 55% who anticipate the same level of revenue growth from Korea.

``The region’s top wealth managers are telling us that the future remains promising for the wealth industry right across non-Japan Asia,’’ said Kevin Burke, Head of Distribution, Asia Pacific at Barclays Capital. "It is interesting to note that the outlook for Southeast Asia is now viewed as second only to China in terms of potential wealth management revenue growth over the next couple of years, reflecting the growing significance of Singapore as a global wealth management centre."

Industry Trends

Around 60% of wealth managers considered market return strategies and alternative investments, such as hedge funds, private equity and real estate, to be very important trends for their clients, significantly more so than thematic investments or quantitative-based strategies. In last year’s survey, 52% of the respondents expected more allocation to alternative investments in the coming two years.

"The fact that more wealth managers are recommending market return strategies and alternative investments to their clients shows that investors are either reverting to less complex but more direct exposure to the market, or seeking opportunities to increase their returns," said Peter Hu, Head of Non Japan Asia Investor Solutions at Barclays Capital.

Product Strategies and Features

Capital protection and multi-asset ‘hybrid’ investment strategies are currently the preferred product strategies in the region. 80% of wealth managers indicated that their clients make substantial use of capital protection and 65% use multi-asset investment strategies. The three most important product features over the next two years are considered to be growth, liquidity and diversification, in descending order, followed by capital protection. ‘Short maturity’, which ranked second most important in last year’s survey, dropped down the rankings to fifth, while diversification increased in importance this year, up to third from sixth.

"These results reflect the influence of the recent market turmoil, with clients placing greater importance on diversifying into liquid assets and protecting their underlying capital rather than pursuing an aggressive short-term investment strategy," said Peter Hu. "Given less lucrative returns in Asian equity markets recently, perhaps investors in Asia will become more receptive to a more consultative solution approach – the true value-add of the wealth management industry – similar to the type of service currently offered in Europe," he added.

The effect of the market turmoil is also highlighted by changes in wealth managers’ recommended asset allocation for a global balanced-risk investor portfolio, with increased weighting in Asian equity, commodities, cash and bonds at the expense of US, European and Japan equity.

Asset Classes

The survey also showed that equity remains the most popular asset class for both flow and structured products, followed by FX then rates, while there is less demand for credit products.

Over 90% of wealth managers indicated that their clients make substantial use of equity flow products, versus 76% for FX and 54% for rates, while on the structured products side the usage was over 90% for equity, 64% for FX and 46% for rates. Over a quarter of respondents said they have no current demand from clients for credit flow or structured products, while a notable shift is the 10% of managers who indicated there was new interest in using fund-linked products to access alternative assets like Private Equity, Real Estate and Hedge Funds.

Industry Challenges

The booming wealth industry in the region does, however, present challenges for practitioners. Competitive differentiation, employee hiring and retention and product innovation were viewed as the biggest challenges facing wealth managers over the next two years.

For further information, please contact:

Clare Williams,

Barclays Capital Corporate Communications,

Asia +852 2903 2298

Angie Tang, Barclays Capital Corporate Communications, Asia +852 2903 2305

Notes to editors:

About Barclays Capital

Barclays Capital is the investment banking division of Barclays Bank PLC which has an AA long-term credit rating and a balance sheet of over £1.2 trillion. With a distinctive business model, Barclays Capital provides large corporate, government and institutional clients with solutions to their financing and risk management needs. Barclays Capital has offices in 29 countries, employs over 16,200 people and has the global reach and distribution power to meet the needs of issuers and investors worldwide.

Barclays Capital is a recognised global leader in structured products and derivatives, having been named in the Risk magazine awards Structured Products House of the Year 2007, Inflation Derivatives House of the Year in 2006 & 2007, and Currency and Commodities Derivatives House of the Year in 2006. Regionally, Barclays Capital was named FX and Commodities House of the Year 2007 in FinanceAsia’s Structured Products Awards, Structured Products House of the Year, Asia 2007 by Structured Products magazine, Currency Derivatives House of the Year 2006 by AsiaRisk magazine, and in The Asset Asian Awards won Best Currency Derivatives House & Best Commodity-Linked Structured Product in 2006.

For further information about Barclays Capital, please visit our website www.barclayscapital.com.

Barclays Capital - the investment banking division of Barclays Bank PLC. Registered in England 1026167. Registered office 1 Churchill Place, London, E14 5HP. Authorised and regulated by the Financial Services Authority and a member of the London Stock Exchange.