High and ultra-high net worth individuals and families are putting careful portfolio construction, diversification of assets and geography, and active risk management front and centre in a bid to tackle growing geopolitical threats, said speakers at the Global Private Banker 2025 Summit held in Singapore on 4 June.
Oliver Turner, Managing Director at JP Morgan Private Bank, said in a panel discussion that the age old 60:40 investment thesis has served investors well over the past few decades. But the model got a “significant wakeup call” in the aftermath of the Covid-19 pandemic and more recently amid growing geopolitical volatility and higher bond yields as the correlation benefits between stocks and bonds came into focus.
That has put pressure on private bankers and family office heads to re-think how best to build a client’s portfolio in line with their changing risk appetite and amid an acceleration in de-dollarisation trends.
“An important constant element that we see across various clients is that currency notwithstanding, the base currency exposure of their portfolio is becoming more of a topic and is something we didn’t see before to this extent,” said Giambattista Atzeni, Head of Family Office at Bordier, adding that this is becoming more relevant for traditional US dollar base portfolios.
Prashant Bhayani, Chief Investment Officer, Asia, at BNP Paribas Wealth Management, pointed out that Asia doesn’t have a lot of reserve currency, meaning replacing the dollar is a challenge.
“The dollar weighting can go down, and there are alternatives like gold and perhaps digital assets, which are some areas people look at in Asia,” he said.
Turner added that one of the areas he has been focused on is real assets and hedge funds. Infrastructure and transportation assets, for instance, are offering more of a traditional inflation hedge versus bonds, while there is growing interest among clients in hedge funds.
“There has been a bit of a re-emergence in uncorrelated strategies,” reckons Turner. “And I think these two areas have probably been the most prominent as it relates to the new wave of portfolio construction.”
However, traditional US dollar bonds continue to have an important role in asset allocation strategies – although the decision now comes down to what duration risk investors are willing to take.
When it comes to diversification, wealthy clients still have some home bias given familiarity with their local markets. However, they are wary of putting all their eggs in the same basket, especially if they are from a country that is significantly impacted by the ongoing trade war.
Bhayani pointed to the example of North Asian clients, many of whom had invested a lot of their money in Hong Kong or China property or in the Hong Kong equities market.
Their investments took a hit in recent years amid turbulence in those markets – demonstrating the need for a well-diversified portfolio.
