Highlights from the Endowus WealthTech Conference 2024 (Part I)

A frank conversation with family office principals & CIOs

• The next crisis is not going to be like the last one. Diversification is about being humble – one cannot prepare for everything without diversification. 
• In constructing portfolios, public markets are still the cornerstone, while private markets are a key part of the arsenal. To take the endowment investment route, the key to all this is financial literacy. There’s a real need to learn from the markets and offerings and importantly from the people, including those in the ecosystem. 
• Legacy encompasses how an individual and a family will be remembered and the lasting impact your choices have on those who remain. Legacy provides clarity on the role of capital in our lives and is a crucial aspect of portfolio construction. 
• It is important to have clarity as to why you need and want a family office, and what the end goals are. The decisions we make today shape our future and determine our true measure of success – whether the family office is solely focused on personal gains, or whether with the wealth we aspire to leave a meaningful mark on humanity.

Does private credit run still have legs? Can private equity come back?

• For long-term investing, base rates, or risk-free rates, should not impact credit portfolio construction. The premium above cash, or the reward of taking credit and illiquidity risk, is about 400-500 basis points above the 4% base rate right now. Default risk is though in focus at present. 
• Distributions to paid-in (DPI), or the new internal rate of return, become relevant nowadays, with higher interest rates and slower IPO activities. For limited partners, the ability to reinvest in future vintages underscores the importance of distributions. The secondary market, the sale of minority stakes to take chips off the table, as well as fund-to-fund transfers, emerge as crucial tools.
• Over to the private equity side, value creation opportunities abound across ASEAN. Family-backed enterprises in this part of the world also welcome guidance from private equity funds to help ramp them up towards widely adopted standards of corporate governance and operational excellence. 
• A valuation mismatch remains between company founders and investors who are not willing to pay up the multiples. As the backdrop normalises for a higher-for-longer interest rate, both sides of the deal table will inch closer to meeting in the middle, which hopefully will encourage more deal activities. 
• In rolling out more private market solutions to individual investors, education remains key - from augmenting the understanding of various asset classes and their investment horizons, as well as, the pros and cons of the semi-liquid, or evergreen vehicles. 

‍Learn about our Endowus Private Wealth solutions, or opt-in as an accredited investor today. 

Unlocking potential: Liquid alternatives in your portfolio

• Liquidity is a personal choice and the value of liquidity in a portfolio comes down to one’s spending needs and the flexibility required to access your funds. Before allocating to any alternative solutions, or any asset classes for that matter, consider your expected time horizon and how long you are comfortable locking up your money. 
• For new investors in alts, gather information on the manager’s historical performance, volatility, and drawdown history to assess their resilience and adaptability. Also, consider the manager's ability to adjust leverage, which indicates their risk management capabilities during market downturns. It is important to go beyond relying solely on backtesting, as it may not fully capture the complexities and nuances of real-time market dynamics.
• Investors should familiarise the components of liquidity, including terms and conditions with regulated UCITS hedge funds with daily liquidity, such as redemption requirements and gate provisions.

‍Read more about Endowus Core Enhanced: Liquid alts in core allocation

Future of wealth & asset management: The role of the advisor and artificial intelligence

• Wealth management is not a winner-takes-all game, as the market itself is growing very rapidly. To establish a strong foundation of trust, which is rewarding over a long time, requires transparency in all aspects of client interactions. This trust is further enhanced by empathetic experiences that cater to clients’ needs.
• Balancing trust and investment performance is a delicate task that wealth managers must navigate. Investment performance is a critical factor that influences client satisfaction and loyalty. Humans are hard-wired to favour positive performance and often experience a greater emotional impact from losses compared to gains. As investors move up the wealth bracket, performance becomes an increasingly important consideration. 
• Younger investors in this generation grew up with low interest rates and the longest bull run in history. Low-cost solutions and self-service capabilities have their appeal to this demographic. Engaging content that resonates with their values is also part of their demands. 
• Endowus differentiates itself as an asset allocation platform, focusing on optimising portfolios rather than trading. Leveraging technology, we can scale excellence in new areas. The diversity of clients on our platform is extensive, which necessitates adaptation in the wealth tech landscape. This is where AI plays a crucial role, enabling us to tailor communications in a more personalised, emotional, and purposeful way. We strive to create a meaningful connection with clients as they entrust us with their investments, fostering growth and achieving their financial goals.

Try it out: New AI chatbot experience on Endowus homepage

The second part of the EWC highlights covered the PM session, which featured industry experts who shared their market outlook and investing insights for retail investors to navigate volatility and macroeconomic changes. Read on here.

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