Rich clients in Asia are exhibiting a change of investment preferences, private bankers say.
The emphasis is on caution, as investors accustom themselves to volatile equity markets, low interest rates, and a turbulent geopolitical environment.
Daniel Truchi, chief executive at SG Private Banking, Asia-Pacific, says there has been a shift toward a more sophisticated blend of derivative products and away from equities or mutual funds.
'People in Asia today are looking for sophisticated structures that offer better performance than equity markets, and which provide a capital guarantee,' Mr Truchi says. 'There is a huge shift toward very new types of products whose underlying assets are no longer equity, no longer fixed income, but interest rates.'
SG and some other banks offer capital guaranteed products based on interest rate movements, known as accrued notes.
'They are basically a play on interest rates,' Mr Truchi says. 'If Libor [the London interbank offered rate] remains low, say less than 4 per cent, with a particular range, then you get a coupon of 6 to 8 per cent. Then if you do leverage on that, you have a very nice double-digit return. You get it with very low volatility, because interest rates are not moving every day like the equity market, and are not dependent on geopolitical events.'
