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Covid-19: what private banks are allocating to alts

Gold glitters in volatility, but are other alternative investments pulling their weight? Five private banks reveal what their balanced portfolios are allocating to alts.

UOB Private Bank – 5%

UOB has halved its allocation to alternatives, that stood at 10% in January.

The Singapore lender has raised its bond and cash holdings in that time.

Within alternatives, it is overweight on gold and neutral on base metals, private markets and oil.

Meanwhile, it has lowered its allocation to hedge funds, from neutral to underweight in May.

CIO Neo Teng Hwee said: ‘We have taken down our allocation to hedge funds given the poor alpha delivery in general. 

‘As a whole, hedge funds have underperformed the public markets. Their strategies have not worked out.’

UOB Private Bank – 5%

UOB has halved its allocation to alternatives, that stood at 10% in January.

The Singapore lender has raised its bond and cash holdings in that time.

Within alternatives, it is overweight on gold and neutral on base metals, private markets and oil.

Meanwhile, it has lowered its allocation to hedge funds, from neutral to underweight in May.

CIO Neo Teng Hwee said: ‘We have taken down our allocation to hedge funds given the poor alpha delivery in general. 

‘As a whole, hedge funds have underperformed the public markets. Their strategies have not worked out.’

Deutsche Bank Wealth Management – 5%

Deutsche Bank has not changed its allocation to alternatives with the coronavirus outbreak.

It sees the highly liquid and developed gold market as a good source of funds for investors.

Jason Liu, head of chief investment office for emerging markets, said recent actions by the US Federal Reserve should also ease the pressure to sell gold.

‘We think a low-rate environment and the safe-haven demand should keep the gold outlook broadly positive,’ Liu told Citywire Asia.

‘Meanwhile, we think the near-term outlook for oil remains uncertain due to the weak global demand amid the Covid-19 lockdowns.’

Indosuez Wealth Management – 10%

Indosuez Wealth Management’s balanced portfolio allocates 10% to alternatives, down from 13.5% at the start of the year.

The bank has trimmed its allocation to commodities and quantitative strategies, said Grizelda Lee, head of discretionary portfolio management for Asia.

‘We acknowledge that the current environment may not produce efficient numbers for quantitative programmes to run, with forward-looking estimates still all over the place.

‘We are also keeping some dry powder for deployment into long-only plays in time to come,’ Lee told Citywire Asia.

In addition, the bank is monitoring opportunities in distressed assets, with the energy sector being hard hit by the virus.

Standard Chartered Private Bank – 18%

Standard Chartered has raised its allocation to gold since January.

Its balanced Asian-focused portfolio now allocates 8% to gold, from 6% previously.

Meanwhile, the bank has kept a 10% allocation to alternative strategies. Within this, it recommends putting 29% in equity hedge strategies, 26% in relative value and event driven strategies, and 19% in global macro strategies.

In its latest global market outlook, StanChart said: ‘We are relatively cautious short term (one to three months), but positive long term (12 months) on risky assets.

‘The one- to three-month outlook remains highly uncertain. Gold may be a good way to hedge risks.’

HSBC Private Banking – 32.5%

HSBC currently allocates 32.5% to alternatives, that’s slightly higher than the start of 2020.

The bank raised its overweight allocation to gold in early March. It also likes hedge funds and select private equity investments.

Patrick Ho, chief market strategist for North Asia, sees shorter-term challenges related to Covid-19 and the reopening of economies.

He also spots longer-term uncertainties after the virus, and with the US elections. ‘We hold the view that investors should build resilient portfolios to weather the market volatility.

‘Diversifying with gold and alternative investments should help mitigate portfolio risk,’ Ho told Citywire Asia.