Julius Baer's Kenny Ho discusses Asia's rich

Julius Baer Group concentrates exclusively on private banking and asset management for private and institutional clients. Julius Baer reopened in Asia ex-Japan in 2006 and now operates across 20 countries and 40 locations, including Dubai, Hong Kong, Singapore and Tokyo. Total client assets for the Zurich-based bank amounted to SFr367 billion ($346 billion) at the end of June 2009. Julius Baer chairman Raymond Baer recently told FinanceAsia that Asia is key to the bank's future. We talk to Kenny Ho, Asia-Pacific head of products at Julius Baer, about the private banking needs of Asia's rich.

How do Asia's rich differ from high-net-worth individuals in the rest of the world?
Asia's tycoons are still building their businesses while elsewhere in the world many businesses are in more stable, capital preservation mode. Further, most of Asia's rich have business interests across multiple industries, rather than being narrowly focused on an established (probably inherited) business line.

In Asia we often see a higher risk appetite, as the generation which has built up the wealth is still the one deciding how to deploy capital. Many of Asia's rich have been able to multiply their capital in their businesses and that is the benchmark they have in their minds when entrusting their money to a wealth manager.

In Asian families the creator of the wealth is often still involved in the business -- how does this influence their private banking needs?
The past decade has seen many of Asia's rich create family offices to manage their wealth and increasingly we find ourselves dealing primarily with the family office. However, the patriarch or creator of the wealth plays an active role in the family office so it is important that we have an equally strong relationship with both parties. The family offices are run by highly qualified, traditionally trained fund managers but family members still play an active role alongside them. We have to balance the requirements of both the patriarch and the person managing the family office.

Do Asia's rich display a preference for specific products?
Investing in equity is still very much the norm here, again related to the fact that in Asia high-net-worth individuals (HNWI) are generally seeking higher benchmark returns and are less averse to risk. It would be a stretch to say holistic asset diversification is now the norm in Asia.

I'd note that accumulators have got a lot of negative press recently with a number of people getting badly burnt on them. But it has been our experience that ultra HNWIs, who are taking a fundamental view on the underlying stocks, are still willing to buy accumulators. These buyers have a long-term view and a larger appetite for volatility.

Have you noticed a change in the way Asian HNWIs are investing after the financial crisis?
Family offices are probably taking an even closer risk at underlying credits than they used to, and doing much of the analysis themselves rather than relying on external assessments, such as those from ratings agencies. They are also much smarter with structures. Typically, they build their own structured products as they have a pretty keen understanding of optionality.

Liquidity has become critical to investment decisions, thus funds of hedge funds and complex structured products are no longer in vogue. The US markets, which are the deepest and most liquid in the world, are attracting renewed attention.