UBS launches new products as alternative investment demand grows in Australia

The global asset manager powerhouse says the traditional multi asset funds model used by UBS is on the way out as it looks to be a strategic partner to clients.

UBS will look to roll out new products in Australia to meet changing demand from clients. Picture: AFP

Global asset manager powerhouse UBS will look to roll out newer products into Australia as changing market conditions and demand for alternative asset classes see it pivot to being a strategic partner to clients.

UBS Asset Management Asia Pacific co-head Thomas Kaegi said during his recent visit to Australia the traditional multi-asset funds model used by many asset managers including UBS for decades was on the way to becoming niche as more demand alternative investment models centred on illiquid products.

“Traditional multi-asset funds that many asset managers were distributing successfully, including UBS, will have less appeal, because that’s the niche, that’s the value-add our clients want to provide to their clients. They want less multi-asset products and more building blocks to implement their asset allocation,” he said. “It’s a trend we have adapted to, and where we structure these building blocks, sometimes white-labelled for our clients is something we are doing more with some larger clients in Australia.”

Investors were adapting to more alternative investment products such as private markets, real estate, private equity, infrastructure and hedge fund investments, which were illiquid or at least semi-liquid.

“We’re trying to get some of our best strategies globally into Australia. We will launch two of these funds in the next two months. Our strategy here is local, global with the local presence that is focused on fixed income, the rest with trying to distribute global strategies,” Mr Kaegi said.

The UBS executive in June started an interim term as co-head of the Asia Pacific region, adding to his duties overseeing asset management in Singapore and Southeast Asia. He told The Australian that alternative investments had seen strong growth in the past few years as private investors increased their exposure to private markets and real estate.

UBS Asset Management APAC co-head Thomas Kaegi.

“This will continue to grow. Asset allocation advice is moving more from a very liquid portfolio to a digital endowment-style portfolio that has a much higher portion of illiquid assets, which are the alternative assets, and our own wealth management is advocating endowment-style portfolios.

“Many of our clients, and here in Australia, are moving more into private banking, Western-style wealth management business where you charge and provide advice, advise in an asset allocation context, and that’s how you try to generate a stable stream of revenues.”

UBS was also having discussions in Australia about becoming more of a strategic partner to clients and helping them solve a particular problem or aspect of their value chain. The multinational investment bank and financial services company has noted the changed backdrop, particularly around interest rates, was still to be adapted to after an extended period of subdued rates.

Mr Kaegi said this created more opportunity for investors in asset classes that would not have been considered in the past, such as cash or market funds.

“This means adjustments for all asset managers, because whatever you previously had on the shelf needs to be adapted to make up for this additional interest rate and deliver high yield,” he said.

He said many investment trends in the US and Europe took longer to take off in the Asia Pacific but the region was also ahead of the world in areas around technology.

“Asia is the leader when I look at what is happening with regards to tokenisation and blockchain technology. Regulators, particularly in Singapore and Hong Kong, are pushing very strongly into that direction and encouraging asset managers like UBS, asset management, to develop and innovate into this direction,” Mr Kaegi said.

An economic slowdown in China has seen the world’s second-largest economy undergo a substantial adjustment process, according to Mr Kaegi. He noted that the slowdown in China, along with the changing political landscape, has affected flow into the region.