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Asian elites shun equities for real estate and theirownendeavours


INVESTMENTTRENDS WRITTENBYRAHULCHAWLA AND


NIKHILDAMA


Asian entrepreneurs are cutting back on public markets in favour of alternatives and investing in their own businesses, but are they underestimating the risks?


E


arlier this year,Aon’s researchfound thatAsia’s ultra-highnetworth (UHNW) entrepreneurs –those with investable


assets valuedatmore than $25m–are investingalmost 25 per cent of their financial portfolios intotheirown businesses at the expense of publicly- listedstocksandother asset classes. In this article, we drawon data


collected by Aon withUHNW business owners in six Asian markets for the 2020BNPParibas Global Entrepreneur Report.We considerhowandwhy Asia’s elites are investing in response to the market environment;where they identify risks and opportunities for their financial portfolios; and which investments they think are overhyped.


EXITEQUITIES Across Asia, business owners have reduced their portfolio exposure to stocks, from19 per cent in 2018 to 15 per cent in 2019. Entrepreneurs in this region are


often running capital-hungry, high- growth businesses, so formany, it is a natural decision to allocate more investment to theirownventures where they fullyunderstand the risks. As a result, approximately a quarter of the Asian financial portfolio is tied up in investments into theirowncompanies, rising to about a third in Singapore and China. To counter-balance these risks,


6 OCTOBER/NOVEMBER 2020


the next biggest tranche aside from equities is held in cash (15 per cent), rising even further inHong Kong and Taiwan.


STRONGFOUNDATIONS Bricks and mortar are particularly attractive to Asia’s entrepreneurs, some ofwhomwill have seen their personal wealth increase exponentially, in line with land ownership value over the decades since purchase. This has contributed to a perception that real estate is a low-risk asset class, a particularly visible sentimentamong older age groups. In fact, just 5 per cent of business-


owning clients across the region believe that real estate represents a high risk to their portfolio, compared to nearly a fifthwhowould say the same in Europe (20 per cent) or the US (19 per cent).


Model portfolio: bricks and mortar are particularly popular investments for Asia’s entrepreneurs


GOINGPRIVATE Across Asia, private equity is also considered an increasingly interesting and attractive asset class, primarily due to the returns potential compared to traditional funds and listed markets. The BNP Paribas report indicates thatUHNW clients are willing to boost their portfolio allocations to private equity considerably over the next 12 months. But our study also indicated


that clients in Asia are less confident about their private equity understanding and more likely to agree that they find these investments complex and difficult to comprehend. Eventually, these views will act as a barrier to growth. This suggests high-quality, specialist advice will be needed to convert interest into allocations, especially since opportunities in the region are


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