How would you react if you woke up one morning and all your bank accounts and trading platforms were gone? The icebreaker was set at the start of IPG Howden’s session on the future, The Future of Money: The Evolution of Asset Classes, co-hosted by The top.
“This wipes out all trade losses and bank loans. I could be happier!’ replied Kevin Tan, executive vice president of a financial and commodities firm and seasoned watch collector, with a laugh. “All kidding aside, in the financial equivalent of a zombie apocalypse, survival mode kicks in. The logical thing to do is to establish how much cash or cash equivalent you have on hand, to illiquid assets from watches and art to real estate, and then plan for your survival and revival.”
A colossal collapse of the financial system would return society to the days of trading physical goods and services for other goods and services, noted Nicolas Monroy, Southeast Asia Director, Cult Wines. “But the silver lining would be that my portfolio of fine wine, as a pure commodity, would have protected much of my wealth,” he added.
“The question makes one stop and think,” replied co-host Vincent Lee, senior vice president and head of Malaysia at IPG Howden, who has spent more than 20 years helping clients achieve their goals for intergenerational wealth transfer and liquidity planning. “People are always focused on chasing the alpha. But things can go south, things can go wrong. A protective allocation can provide protection, and also with insurance you create future value that is certain.”
Using technology to drive investment
Advances in technology, rapidly emerging investment vehicles and a growing (and diverse) global investor base are behind what is believed to be the greatest wave of market democratization in modern times.
“We’ve seen robo-advisors, fractional property investments and crowdfunding platforms brought to reality through technology. This is a positive trend that makes it easier and more transparent for the masses. With the rise of cryptocurrency, NFT and Metaverse powered by blockchain technology, we have also witnessed new wealth creation and value capture, whether through investment, new jobs or even the creation of new businesses,” noted Belinda Lim, author off BlockLass: The Readable Beginner’s Guide – An Introduction to Blockchain and Cryptocurrencies for Ladies.
“However, technology is simply a tool used by human beings and is subject to human failings. We have seen how misplaced trust in platforms like [crypto lender] Celsius has also caused huge losses worldwide. With the aggregation of valuable assets on one platform, there is also the risk of hacks targeting new fintech companies,” she added.
In 2021, Lim co-founded the advanced security-enabled wallet Avarta with a mission to simplify the use of Web3. Avarta uses facial recognition for its identity verification and authentication service and is building a trust rating system so that people don’t need to know the person on the other side of the transaction, but can still transact safely.
People are always focused on chasing the alpha. But things can go south, things can go wrong. A protective allocation can provide protection and also with insurance you create a future value that is certain.
Vincent Lee, IPG Howden
“The promise of fintech has always been to democratize financial services and offerings by making them more accessible,” agreed Kelvin Lee, co-founder and CEO of alternative asset marketplace platform Fundnel, which launched Southeast Asia’s first digital token. whiskey based. “Although I don’t have a crystal ball for the future, I believe the concept of money and wealth will likely be turned upside down, bringing more diverse, unique and complex opportunities.”
Launched in 2016, Fundnel lists real assets, including art, wine and property. Its investor community has also participated in private equity deals such as SpaceX, Gojek, Grab, Bukalapal and top tier funds from leading private equity and venture capital firms.
Lee and his team are also increasingly focused on helping early stage investors, founders and founding employees monetize their holdings. “In this way, we facilitate the start of a virtuous cycle of attracting capital, which would otherwise be locked, to support a new generation of startups.” At the same time, we are opening up opportunities for new investors to inject capital into established companies, many of which choose to avoid the public markets.”
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What investors want
How exactly do the rich invest their money these days?
Kenneth Tan, managing director and head of market at a private bank, shared insight from working with ultra-high net worth individuals to build their financial legacies. “Our clients are typically diversified and plan their asset allocation percentages with advice from their bankers or family office professionals.”
For Asian clients, property makes up the majority of their total net worth, while international clients tend to invest in discretionary mandates with an Asian slant “because we are seen as specialists in Asia”. Private equity investment is also increasing. However, the next generation of investors is looking at asset classes differently, preferring virtual currencies and NFTs, according to Tan.
He keeps his own portfolio healthy through diversification. “Because of my work in a bank, I try to diversify my risks away from the financial markets. So my weighting in financials – like yield products and ETFs – is less than in non-financials.” The long-time wine enthusiast focuses his investments on
the latter include real estate and alternative investments related to fine wine and cognac.
Because of their low correlation with other financial assets, luxury collectibles such as wine, art, watches and handbags offer significant diversification benefits.
Several collectibles had a remarkable year in 2021 thanks to reopening economies, according to the latest Credit Suisse Collectibles report. Even in 2022, despite uncertainty and macroeconomic and geopolitical changes, collectibles are off to a strong start.
A portfolio of fine wines is “compelling as a long-term savings vehicle” and can deliver equity-like returns with one-third the volatility, according to Monroy of Cult Wines, which manages $440 million in assets and tailors wine portfolios for the investors. He explained that while the first wave was older, wine-savvy and well-resourced, Gen X, Millennials and even Gen Z are increasingly entering the space thanks to technology-enabled data aggregation and analysis and the creation of reliable markets.
As with financial assets, collectibles differ from each other. Watches and jewelry are classic stores of value with lower volatility than wine, while fine art is more of a capital growth asset with a higher average return but also higher volatility.
Investing: driven by passion or pragmatism?
“There are many forms of store of value, but watches fall into the category of entertainment, unlike stocks or metals. You can wear them, display them, become a social media personality and certainly meet fellow collectors with the same zeal. They’re also relatively easy to maintain and store, unlike other ‘pastimes’ like wine or cars,” shared Kevin Tan, who has an Instagram following and moderates the popular watch community WatchProSite.
“As an asset class, watches can be a great buy if you’re buying cheap, such as on discount, or if you’re buying blue-chip watches like Rolex and Patek Philippe with some demand outstripping supply, or if you’re making an expert guess about the next hot watch. The first two are defensive plays and the last one is speculative.
Beginning when he was just 16 years old, Tan’s vast watch collection has grown to around 1,000 and includes flea market finds to coveted watches with sentimental value to him, such as the Jaeger-LeCoultre Reverso Gyrotourbillon and A. Lange & Söhne Datograph. “I collect anything that I like and that is relevant or significant from a watch perspective,” he shares.
Needless to say, art will always have value and has been so since the Hellenistic period.
Stéphane Le Pelletier, Opera Gallery
When it comes to fine art, collectors are still looking for timeless blue-chip investments and big names like Marc Chagall, Bernard Buffett and Keith Haring. At the same time, there is a growing interest in emerging and younger artists, noted Stephane Le Pelletier, Asia Pacific director of Opera Gallery, which has 13 galleries worldwide.
“The demographics of collectors have shifted slightly as younger collectors are becoming more active in the art market these days. Their taste in art is shaped by the works that capture the spirit of the generation. Contemporary art has endless potential to do this – proven by record sales.”
Le Pelletier, a collector himself, advises that any investment in art should stem from appreciation and passion. “We believe that financial value is secondary to personal value, even if the two inevitably overlap. Once you have a piece of art that you can’t live without, you realize that the return on investment and increase in market value are just bonuses, the icing on the cake.”
“Needless to say, art will always have value, and it has since the Hellenistic period.”
Concluding the session, Vincent Lee of IPG Howden added: “As with technology, the assets people hold and acquire evolve over time. We are also seeing more HNW clients incorporating insurance solutions as part of their overall asset allocation. They like them because of their non-market correlation nature, the ability to create some forward value, and the accumulation of cash value accumulated with a multiplier effect. It is a simple and effective strategy to create and preserve wealth for their next generation and beyond.”
Preserving wealth, protecting legacies
An asset class with a low correlation to the markets, life insurance remains a popular financial instrument among affluent investors looking to diversify their portfolios and build financial resilience during times of market volatility.
IPG Howden can help HNW individuals and families preserve their wealth and protect their legacies by providing the liquidity they need with the use of globally sourced insurance solutions so they can better prepare for the future.
To learn more, visit www.ipghowden.com.
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