China has top growth potential for Asian wealth, says BarCap

China is viewed as having the highest growth potential of any wealth management market in Asia during the next two years, followed by India, according to Barclays Capital’s annual industry survey, published on April 23.

A large majority (81%) of respondents expect assets managed by the industry in Greater China to grow by 16% annually or more over the next two years. Only 65% of respondents to last year’s survey were this bullish on the country.

At the same time, Barclays said wealth managers were slightly less optimistic about the growth potential of India compared to last year, but 60% still forecast growth of at least 16%.

The survey also found wealth managers are becoming more comfortable recommending alternative investments, with 52% expecting to allocate a greater percentage of money to the asset class over the next two years.

Alternative assets included not just hedge funds, but private equity, real estate and total-return funds, said Peter Hu, BarCap’s head of investor solutions for Asian ex-Japan. Wealth managers were feeling a need to widen their search for potential returns, he added.

“With the so-called traditional asset classes, a number of them have started to struggle in terms of absolute returns,” said Hu. “For example, interest rates are quite low, interest rate curves are quite flat, credit spreads are quite tight. With equity markets, a lot of them are at or close to all-time highs.”

Of the main products on offer, equity-linked products are the most popular, with 88% of respondents ranking them as a ‘primary focus’ of their portfolios, followed by 54% citing FX-linked products and 50% citing index-linked.

Moreover, wealth managers expect acquiring and retaining staff to be the industry’s biggest challenge in Asia, with 88% citing it as difficult or very difficult.

Respondents felt the second biggest challenge was remaining differentiated from the competition, with 82% saying this would be difficult or very difficult.