Lombard Odier, Geneva’s oldest bank, has seen its assets under management in Asia grew at double-digit rates in the last three years, as it accelerated expansion of its private wealth operations in the region. Vincent Magnenat, the Head of Private Banking for Asia, speaking at the group’s Asian headquarters in Singapore, observes that rich families and individuals are increasingly consolidating their wealth under one bank: “Most of our Asian clients have more than one bank, compared with clients in Europe, although that is slowly changing. People are starting to reduce their number of banks, because it takes a lot of time to manage those bankers and it isn’t cost efficient.”
Lombard Odier currently manages US$8 billion of assets in Asia. And more than 50% is managed under discretionary mandate, where the bank is authorised to make investment decisions on behalf of the client. According to Magnenat, discretionary management portfolios typically represent about 20% of assets under management globally and in Asia, across the industry, that portion is approximately 5%.
The company’s investor portfolios in Japan are all managed on a discretionary basis, says Magnenat. This is because most family wealth has already been passed on to the second or third generation and the younger generation of high net worth individuals are more open to giving external managers control over their investments.
However, in other parts of Asia, wealth is relatively new and is predominately held by the first and second-generation family members. The heads of most wealthy Asian families remain key decisions makers and they are often keen to stay actively involved in managing their own assets. Still, more families in Asia, excluding Japan, have started to engage professionals to manage their wealth, says Magnenat.
There are differences also in the way Asian invest, compared to private bank clients in Europe. Asian high net worth individuals and family offices prefer to be invested in fixed income and alternative investments such as hedge funds, says Magnenat. In Europe, there is a greater willingness to invest in public and private equity markets. The experience is not uniform however, and the experience of Lombard Odier contrasts with another Swiss bank, UBS’s private clients, many of whom are holding a high level of cash.
Simon Smiles, the chief investment officer at UBS in charge of investing for rich individuals with a net worth of more than US$50 million, says that the rich in Asia are holding at least a quarter of their wealth in cash and are showing an increasing appetite for European equities.
Lombard Odier made a profit of $70 million in the first six months of this year. The company, which reported earnings for the first time in its 218-year history, is one of 106 Swiss banks that signed up last year to a disclosure programme set up by the US Department of Justice as part of its efforts to clamp down on tax evasion by US citizens.