Endowus Private Wealth Insights Report: 3 in 5 HNW investors in Hong Kong want to increase asset allocation to private market strategies and hedge funds, with preference for digital wealth platforms
- A new study by Endowus Private Wealth on High Net Worth (HNW) investors reveals 62% of Hong Kong respondents intend to shift more assets into private market strategies and hedge funds
- HNW investors surveyed across Singapore and Hong Kong are dissatisfied with existing portfolio returns, and would consider taking more risk for capital growth
- Digital investment platforms were cited as the preferred mode of access for private market and hedge fund investing in both markets (Hong Kong 57%; Singapore 37%)
- The convenience in managing private and public portfolios holistically is a key consideration for those looking to increase allocations to private market investments
Asia’s leading digital wealth platform Endowus has released the Endowus Private Wealth Insights: HNW Investor Sentiment 2024 report, shedding light on the preferences and current barriers faced by nearly 500 HNW respondents in key financial hubs, Singapore and Hong Kong, when accessing and managing their private market and hedge fund investments.
Against a backdrop of persistent economic uncertainty, the study conducted by Endowus Private Wealth (EPW) reveals that 3 in 5 HNW investors in Hong Kong (62%), and 2 in 5 HNW investors in Singapore (42%) have the intention to allocate more to private market strategies and hedge funds, and are actively seeking returns better than their existing portfolio.
HNW investors surveyed in both markets express willingness to take some risks to grow their capital meaningfully (Hong Kong 41%; Singapore 45%), with a smaller proportion signalling an appetite for greater risk to maximise returns (Hong Kong 26%; Singapore 25%).
Risk appetite in 2024
What best describes your risk appetite for investment this year?
When probed about primary concerns with their investment portfolios, Singapore respondents reported a frustration with generally underwhelming performance, with a sizable 48% feeling their returns have room to grow, contrasting with Hong Kong’s 33% who felt similarly.
Comparatively, while Hong Kong respondents are also seeking better returns, the top concern (36%) for respondents is the lack of greater diversification of their investment portfolios and not knowing how to achieve this, with 33% of respondents feeling the sting of high fees eating into their overall returns.
Concerns about portfolio
What are your biggest areas of concern regarding your investment portfolio right now?
The data further shows that HNW investors in Hong Kong appear to take a longer-term view on their portfolios, with not being prepared for a comfortable retirement ranked as another top concern, where 1 in 3 (32%) have doubts if their nest egg will suffice, compared to only 1 in 5 (21%) in Singapore who are worried about retirement. Hong Kong’s respondents are also proactively thinking about succession planning, with 35% highlighting this need against Singapore’s 27%.
HNW investors in Hong Kong are focusing on private markets and other financial alternatives, rather than public market assets
The Endowus Private Wealth Insights: HNW Investor Sentiment 2024 report has found that an overwhelming majority (87%) of Hong Kong respondents intend to increase their allocations to both private market strategies, as well as other financial and non-financial alternatives such as real assets and collectables in 2024.
Specifically, 62% of those surveyed are planning to increase their allocations to private assets and hedge funds, while only 30% are looking to allocate more to public markets — due to the advantage these asset classes provide in lower correlation to public markets, a source of diversification, and presumably better risk-adjusted returns over the long term.
This trend is more pronounced in Hong Kong than in Singapore, where over half (58%) of respondents expressed similar intent to allocate more capital to private market strategies and other forms of alternative asset classes, with 42% keeping their eye specifically on private assets and hedge funds.
Appetite for increasing allocation
In 2024, do you intend to increase your allocation in public markets, private markets & hedge funds, or real assets and other alternatives?
The data here reaffirms earlier findings that HNW investors in Hong Kong are prioritising greater diversification in their existing portfolios, with private market strategies and hedge funds coming into focus as an ideal starting point. Absolute return hedge funds, for instance, look at absolute performance instead of relative performance — which can offer investors more downside protection, aiming to deliver steady positive returns regardless of market conditions.
Notably, when asked to specify their current investments held, almost all (99%) Hong Kong respondents reported investment in at least one public market asset class, with stocks being the most popular option (85% selected). In contrast, only half of respondents are currently invested in private market strategies and hedge funds.
Current investments held
Which of the following asset types do you currently invest in?
Samuel Rhee, co-founder and Chief Investment Officer of Endowus, said, “We are excited that the findings from the first Endowus Private Wealth Insights report reinforce the growing need among HNW investors to build portfolios with both traditional and alternative asset classes to mitigate overall risk and lower volatility. This is why Endowus is working with some of the largest global players in the private markets to continually broaden our offerings to democratise access to institutional-grade products and solutions at a fair, transparent price. We have already made available a broad collection of private equity, private credit, private real estate, and absolute return multi-strategy hedge fund solutions, all while ensuring improved liquidity and lower minimums to be eligible for access. We’re committed to allowing access to never-seen-before opportunities for clients, and setting HNW investors up for success.”
Hong Kong respondents have concerns around private market and hedge fund investing; require more trustworthy financial advice
Despite the observed demand for more investments in private market strategies and hedge funds, half of the respondents in Hong Kong and Singapore (52%) indicated that they have little to no experience investing in these asset classes. However, this lack of experience appears more pronounced in Singapore than in Hong Kong: one in three (32%) HNW investors in Singapore stated they have never invested in private market strategies or hedge funds, as compared to only 8% of respondents in Hong Kong.
Private markets & hedge fund investing experience
What best describes your level of investment experience in private markets (e.g. private equity, private credit, private real estate) or hedge funds?
That said, many HNW investors in Hong Kong still rely heavily on financial advisors today, which suggests that experience does not necessarily translate to expertise. In fact, a majority (60%) of Hong Kong respondents state they manage their investment portfolio (across public and private markets) with the help of a financial advisor, contrasting with the majority (71%) of Singapore respondents who manage their investments entirely or mostly on their own.
Portfolio management
Do you manage your investments on your own, or engage the help of a financial advisor?
This continued reliance on financial advisors in Hong Kong is, in part, attributed to the ongoing concerns HNW investors have around private investing. The top concerns for Hong Kong respondents are lock-up periods (42%), followed by limited access (41%) where they need to engage specialised investment companies or private placements in order to access closed-door private market opportunities that are not readily available to the general public.
Apart from access, HNW investors in Hong Kong are keenly aware of the need for robust due diligence to access quality private market strategies and hedge fund managers and products. Over a third of respondents also cited concerns about the complexity and know-how required (38%) as well as due diligence expectations (35%).
In this scenario, unbiased advice becomes ever more important, and investors want to lean on the knowledge and expertise of a wealth manager who can relieve some of this burden.
Steffanie Yuen, Head of Hong Kong of Endowus, added, “In today’s unpredictable market, it is increasingly important for financial institutions and platforms to perform their fiduciary duties well, and render thoughtful insights and investment advice that are 100% aligned with their best interests, and not driven by sales commissions. At Endowus, we take pride in our industry-leading, fee-only business model, unique hybrid client advisory, and our commitment to recommend only the best, most suitable public and private markets solutions that can be managed holistically. Leveraging wealthtech allows us to provide an integrated wealth management experience and quality wealth advice with zero conflicts of interest to clients – both retail and accredited investors, institutions and family offices – at scale.”
Digital wealth platforms can solve the main blockers for Hong Kong’s HNW investors
In both the Hong Kong and Singapore markets, respondents who are currently invested in private markets and hedge funds identify the challenge in managing their investment portfolios holistically with different wealth managers as the primary barrier to investing more into these asset classes. This difficulty is cited by 43% of Hong Kong respondents, and 37% of Singaporean respondents.
This highlights the challenge posed by fragmentation in experience, as investments in public and private market strategies are spread across numerous access points – even managed by different wealth managers – resulting in a complex experience where investors do not have a single view of their total wealth. It underscores the need for a holistic platform to seamlessly offer a wide array of assets, from public markets to private markets and hedge funds, so as to enhance the investing experience.
Top 3 barriers for Hong Kong HNW investors to increase their allocation
What are some barriers that might be holding you back from allocating more to private market strategies and hedge funds?
This holistic view, coupled with the demand for greater speed and convenience, explains the notable shift towards digital investment or wealth platforms for private market and hedge funds investments, ahead of traditional financial intermediaries such as private banks and relationship managers. It is thus unsurprising HNW investors in both Hong Kong and Singapore picked digital platforms as their preferred mode of investing in private market strategies and hedge funds.
Preferred access to private market strategies and hedge funds
What is your preferred mode of investing in private market strategies?
This trend highlights the value HNW investors place on convenience, accessibility, and the diversity of offerings provided by digital platforms that can empower individuals to manage their investment portfolios holistically and independently.
Gregory Van, co-founder and CEO of Endowus, said, “Technology will continue to play a crucial role in scaling unbiased, expert advice and broadening access to traditionally exclusive markets. It is a vital lever in empowering individual investors with complete oversight and control over their assets, and visualising their public and private market portfolios in real-time. Digital wealth platforms could be an answer for HNW investors looking for an all-in-one platform that seamlessly integrates best-in-class public market, private market and hedge fund exposure with speed, transparency, and efficiency.”
The full Endowus Private Wealth Insights: HNW Investor Sentiment 2024 report can be downloaded here.
