Asia private banking market spurs demand for bespoke structured products

An increasingly savvy investor base in Asia is paving the way towards a more customised and managed approach to structured products aimed at private banking investors

Asia's private banking investors look for guidance and increased customisation

Tighter regulations imposed on the retail structured products market in Hong Kong and Singapore lie behind the move by product creators to increase their dealings with private banking and high-net-worth investors, but a more competitive structured products market and a more sophisticated investor base are calling for an increasingly bespoke and dynamic approach.

"Investors want to know more about the returns they can get and they want to be advised when to get in and out of markets," says a wealth management banker at a local Singapore bank. "The shift is that structured products are now much more tailored around investors."

Coutts has seen inflows into its tailored portfolio management and active advisory services in the last few weeks despite the turmoil in Europe, reflecting investors' need for guidance, says Ken Sue, managing director, head of products and services at Coutts in Hong Kong.

"There is an increased desire to look at discretionary products managed on a bespoke basis," says Sue. "The market environment is one where investors need to be dynamic in their asset allocation. It was traditionally thought that diversification could protect you, but in the past four years it has become clear that diversification didn't help and that to stay invested in the markets and take advantage of the opportunities out there investors need advice."

Another shift is the need for structured products to serve a specific purpose as opposed to launching products aimed at mass market appeal, says Raymond Tan, vice-president, investment and bancassurance, retail banking at CIMB Bank in Singapore.

"Ultimately, structured products need to serve a specific purpose such as for hedging, protecting the downside or to get exposure to very specific entities,"  says Tan. "This is where structured products come in useful because they are flexible and can allow a lot of customisation."

The low interest rates and volatility in the market have made it more challenging to structure capital-protected products offering the short tenor investors favour. One solution is to structure a partially protected product, though this often takes it out of retail investors' reach.

"Generally speaking, we can do a lot more with the mass affluent segment as a good number of them fall under the category of accredited investors if they have S$2 million in net assets or S$300,000 dollars in annual income," says Tan.

As structured products become increasingly tailored to investors' needs, the capacity to launch products quickly to take advantage of market opportunities while also providing a more dynamic service is calling for a broader set of skills.

"Bespoke is really the key in the high-net-worth customer space. It's a more dynamic process and clients are increasingly involved in the process," says Bryan Henning, head of global research and investments at Barclays in Singapore. "Structurers need a broader set of skills and need to be nimble - you can't just be a 'structurer' anymore."