Going private

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As investment banks build up their wealth management arms in Asia, private banks have also started to make inroads in the region. For one, Switzerland's Julius Baer has made its presence felt by setting up an advisory office in Hong Kong and coming onshore in Singapore, opening the two offices officially on November 3 and 9 respectively. It established the Hong Kong office in late 2005, while the Singapore office was set up in 2002 by Banco di Lugano, which Julius Baer acquired in 2005 as part of a deal with UBS.

Julius Baer has a clear focus on ultra-high-net-worth clients - defined as $5 million and above - which is a key differentiation strategy, says Kenneth Ho, the bank's head of products for Asia-Pacific, based in Hong Kong. The firm's client base in Hong Kong includes a fair share of entrepreneurs who have made their own money and cultivated a punter's mindset along with it, says Ho. "These clients tend to have higher risk appetites. They develop a strong view and take punts when they believe a certain stock will rise. And so they either buy that stock or a derivative on that stock where they can trade in and out. That's where we find most of our Asian demand."

At the other end of the spectrum are risk-averse individuals who want capital-protected products. These conservative clients have often had wealth for many years and experienced the rollercoaster stock-market crashes, say Ho, and want to keep the wealth for the next generation. For them, the bank often structures longer-term products and offers portfolio management services.

Volatility and innovation

The bank has also been helping clients benefit from the volatility in Asian markets in the past few months by taking short-term positions in Hong Kong and India. It has also pushed the barrier of innovation with structured products that are based on water, alternative energy and oil. "Last year, for example, we made a very strong call into commodities - buying gold, water and oil among others," says Ho. "We also helped some clients who wanted to trade oil futures using our execution platform."

But, as Ho points out, a bank is only as good as its staff. And Julius Baer has made that its top priority. It has more than 100 staff in Asia and plans to double that number within the next two years. But it faces stiff competition, as other private banks have also been on a hiring frenzy - ABN Amro and Credit Suisse are just two other firms to have made major private banking hires in Asia in the latter half of this year. And banks are willing to pay high guaranteed bonuses to attract bankers and other relationship managers from rivals.

"The first step is hiring good bankers, people that you want to represent that brand," says Ho. "At most of the larger private banks in Asia, the average relationship manager has less than $100 million in assets under management, while in my experience senior relationship managers at other banks are typically in the $300 million to $1 billion range. That is the range we are targeting. While we have fewer relationship managers, it goes well with our focus on clients"

To accompany a strong front-end team, you need strong support at the back end, says Ho, who has built a research team and leverages on the existing execution team. "For people that trade structured products, the first thing you must do is have a good research team to develop research views on stocks," he says. "Then you must have a good trading platform for execution and to make sure you get the best price. And then you have a structuring team that puts together the products."

This means Julius Baer can offer the full range of solutions, says Ho. "We can offer our clients a buffet of products that runs the entire spectrum of their risk appetite - from trading-orientated products, limited-capital-protection products and capital-guaranteed products," he says. "We can specifically structure a solution that has the theme, kinds of stocks, type of coupon and tenor completely tailored to individual needs."

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