Thionnet said that UBP has seen recent success with private market opportunities involving MedTech, commercial aircraft, student housing and oil concessions.
While declining to provide specifics on asset flows from Asian clients, he did add, that Asian clients’ participation broadly reflected their share of private banking AUM at the Swiss bank. “Across the various deals over the past year, funding from our Asian clients amounted to approximately ten per cent on average, with a sharp increase on the more recent deals,” said Thionnet.
UBP had CHF 92.3 billion in private banking AUM at the end of 2016. Around CHF 12 billion of that total is Asia-based. The pure play completed its acquisition of Coutts International in April last year, effectively boosting its book in the region by 1,424.5% YoY.
According to Thionnet, UBP’s direct investments capabilities proved to be an important string in the bow for the Swiss bank for Asian clients.
“Direct investment is a unique proposition in our service offering that has been particularly appealing to the ultra high net-worth clients in Asia, who are looking towards diversification,” shared Thionnet.
However, Thionnet notes that such an offering is not for everyone – but targeted at the most qualified of investors and those who can afford the illiquidity. Such deals tend to be illiquid, and remain so for a number of years. As no one can predict what can happen in the interim, there is a cap on how much each client is able to invest into such assets.
“Our Asian private clients who have made their wealth as entrepreneurs understand and appreciate the ‘tangible’ nature of direct investment opportunities. Real investments are what they deal with in their ‘entrepreneurial day-to-day life’ and they tend to have an intrinsic capability to identify appropriate opportunities to invest in. So it is with a real interest that they participate in such a program that differs from their other financial assets”.
Thionnet explained that the deals offered by his team are in the shorter range of 3-5 years, as clients want to see predictability. “Of course there is room for different deals in different time-spans, but from our perspective, clients have indicated that this is a preferred time-frame - they want a shorter term, and we have seen success from this approach.
“Our task is to identify opportunistic private markets deals and then propose them to our qualified investors” Thionnet said. “It's then up to our clients to decide whether they want to go for it. They have access to the same data that we have”.
UBP currently favours thematic opportunities that are consistent with few global macro-trends among which an ageing population (‘silver economy’) bringing around 5-6 deals a year to the table.
The bank is by no means the only player to have its eye on such opportunities and last year’s flurry of outbound M&A activity by Chinese investors will have only increased the competition (by some estimates, Chinese private equity firms alone recorded US$7.4 billion in offshore transactions in the first half of 2016 although capital control restraints have had since muted activity).
Even so, Thionnet said that the bank’s strong partner network across Europe, its “entrepreneurial DNA”, as well as its focus on under-the-radar opportunities that clients can “understand”, keep it competitive.
For example, the bank recently closed an investment into student housing in continental Europe - particularly in countries that Thionnet says are “untapped markets in that segment. There is always great interest for us to participate to the development of projects that satisfy an obvious undersupply.”
“What we do not do however, are speculative deals. Also, we do not look for opportunities in M&A activity or advice on that” added Thionnet.
While the total value of private equity deal in the Asia Pacific fell to US$92 billion in 2016 from from US$124 billion in the previous year, according to data from Bain & Company, a recent Asian Private Banker survey of private banks, independent asset managers and single family offices, found that asset flows into private markets in 17Q1 increased by as much as 20% YoY, although over half of all respondents said that Asian client demand for direct investments remains ‘fair’.
Head of Direct Investments Group