HSBC Private Banking raised more than US$1.3 billion of private client funding for alternative investments in Asia from April 2019 to April 2020 across a broad range of product solutions including hedge funds, private equity, private credit and US$350 million in a private REIT strategy.

Global markets across every major asset class experienced significant volatility in the first quarter of 2020, and during times of market stress alternative investments provide a number of key portfolio benefits, including diversification and downside risk protection, as well as, allowing investors to access a broader universe of investment strategies that are less correlated with markets.

In addition to diversification, investments in private markets may also offer a higher return potential when compared to the public markets, especially in the current low yield environment. 

In recent years, the overall number of publicly listed companies in developed markets has been declining as more companies are choosing to stay private and for longer periods than ever before. In addition, the nature of private equity’s investment horizon allows managers to deploy capital across a multi-year period which may help to lower volatility.

Against this backdrop, clients with the appropriate risk profiles and a long-term investment horizon are increasingly looking to investment opportunities within private markets (both equity and debt) as a way to diversify their portfolios, according to Edward Moon, regional head of alternatives, Asia-Pacific, HSBC Private Banking. So far this year, the bank has already raised over US$850 million in alternative investments on behalf of clients in Asia.

HSBC has offered a diverse mix of alternative solutions over the last 12 months including a secondary private equity strategy, a global real estate private credit fund, a European distressed debt/special situations vehicle, a private REIT and a core diversified private equity solution. HSBC has also seen considerable inflows in the hedge fund space across a broad range of strategies, including equity long-short strategy, multi-strategy and market neutral strategy.

HSBC Private Banking recently introduced its first private equity impact fund to their Asian client base, further enhancing its suite of alternatives offerings to meet the needs of clients, in particular the ultra-high-net-worth individuals (UHNWIs) and the next generation of investors. The fund invests in private companies that are driving positive environmental and social impact and responsive growth.