“Equity and indeed most traditional asset classes have done pretty well since 2008,” he noted, but clients are becoming more receptive to instruments that are less correlated to traditional investments.
Most private banks recommend up to 20% allocation to alternatives, said Tan, but most investors’ actual allocation does not come close to that. However, with the recent market volatility, more clients may want to raise their alts exposure.
DBS’s wealth business had S$140.5bn ($98.8bn) in assets under management as of June. Tan acknowledged that the build out of alternatives would require investment in talent and staff training, as well as efforts to educate investors.
In May, the firm hired Sharon Lee as senior vice president of investment funds to focus on private equity and alternative investments. She joined from Standard Chartered, where she had worked since August 2011, most recently as Southeast Asia head of funds and portfolio solutions.
DBS is among several Asian private banks that are strengthening alternatives offerings. For instance, Bank of Singapore hired its first head of private equity early this year and has been looking to boost its focus on hedge funds – particularly UCITS products – in the past year or so.
Liquid alts interest
Liquid alternatives are getting attention because many Asian investors still prefer instruments they can enter and exit quickly, Tan said.
Hedge funds are an area of growing interest for DBS. Most people usually think of long/short equity strategies, said Tan, but his firm is also looking to add more multi-strategy products. For example, the firm recently onboarded the $45bn Lyxor/AQR Systematic Total Return Fund.
Demand for absolute- or total-return strategies has returned over the past year, as investors seek more stable performance.
DBS also still sees demand for credit-related strategies.
Funds investing in loans and floating-rate instruments have provided low but positive year-to-date returns versus the flat performance of Barclays US Aggregate and negative returns of the MSCI World indices. Tan believes they will continue to attract interest, given expected US and UK rate hikes.
He added that getting access to established good-quality credit offerings was not an issue.
Property, however, is not something that DBS actively focuses on through funds, said Tan, as most Asian investors are already naturally overweight the asset class. Likewise, clients have not shown much interest in infrastructure assets.