Global wealthy investors, especially the younger generation, are increasingly allocating assets to alternatives investment to mitigate risks and boost returns amid geopolitical tensions and ongoing interest rate cuts, and Hong Kong investors are emerging as a regional frontrunner in such shift, industry insiders said.
“Alternatives investments, such as gold, hedge funds and private markets, are emerging as mainstream components in investment portfolios. This trend is particularly evident among Generation Z investors born between 1995 and 2009,” said Wang Ying, head of investment and wealth solutions at HSBC China.
Citing a HSBC survey published in August this year, Wang said the proportion of alternatives allocation among global respondents nearly doubled over the past year, with gold allocation surging by 120 percent.
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The findings were based on a survey of over 10,000 affluent investors in 12 countries and regions — the United States, the United Kingdom, Australia, Singapore, India, Indonesia, Malaysia, Mexico, the United Arab Emirates, the Chinese mainland, Hong Kong and Taiwan — whose investable assets range between $100,000 and $2 million.
“Global investors are diversifying their asset allocation portfolio as it can enhance returns without significantly increasing risks. The primary reason lies in the low correlation between different asset classes. The value drivers of alternatives differ from those of traditional assets like stocks and bonds,” she said.
Generation Z investors are leading the adoption of alternative investments. They are allocating 6 percent of their assets in alternatives this year, compared with 2 percent in 2024, the survey found.
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While noting that alternatives investment offers significant benefits, Wang also warned of risks. They include liquidity constraints as many private equity funds have a typical 10-year horizon, as well as the need to fully grasp the risk profile of strategies like concentrated investment.
A September study by Singapore sovereign wealth fund GIC Pte Ltd and JP Morgan Asset Management also pointed out the challenges of alternatives investment. Unlike stocks and bonds, data on alternatives remains fragmented, with no centralized platform for aggregation. Moreover, valuations of alternatives are determined by asset managers and appraisers, rather than frequent market transactions.
Pulkit Sharma, head of alternatives investment strategy and solutions at JP Morgan Asset Management, said market inefficiencies, as well as return disparities between different asset classes and among fund managers, present opportunities for asset allocators, but success hinges on a disciplined, data-driven investment framework.
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Global investors in Hong Kong stand out for their proactive embrace of alternatives investment, given the city’s deep-rooted role as an international financial hub.
According to a report released last week by Singapore-based digital wealth management platform Endowus, Hong Kong investors are taking a more positive attitude towards alternatives investment, compared with their Singaporean counterparts.
The report showed that over 40 percent of the platform’s wealth management clients have incorporated alternatives into their investment portfolio, higher than Singapore’s 10 percent.
Steffanie Yuen, managing director and head of Hong Kong at Endowus, said Hong Kong boasts a large financial sector, with about 20 percent of its population dealing with finance-related work.
“Hong Kong investors generally have a higher level of financial literacy, enabling them to better understand and embrace alternative products. By comparison, although Singaporean investors also show interest, their understanding of alternatives investment remains relatively limited and requires more time to develop,” she said.
Contact the writer at sally@chinadailyhk.com
