In 2018, the global financial market saw some of the greatest volatility since the global financial crisis a decade ago. Globally, growth is expected to slow down –affecting investor optimism - with escalating trade wars between the two largest economies as well as a gradual withdrawal of the US Federal Reserve’s monetary stimulus adding to concerns.
It can be difficult for investors to achieve their investment goals when markets are volatile or uncertain. Recently, even historically bad year-end market performances were overshadowed by the outcomes of December 2018, which was known as the worst December for global stocks since 1970. A growing number of high-net-worth individuals (HNWI) are, unsurprisingly, turning to Private Mandates to manage their investment portfolios.
What are Private Mandates?
Private Mandates are a form of tailor-made wealth management approach where investing decisions, guided by predetermined risk parameters, are at the discretion of an investment manager. It is a popular choice among investors who wish to delegate this responsibility to a professional with sufficient resources to closely monitor and navigate market uncertainties.
Since the investment manager makes all the buy and sell decisions within the discretionary portfolio, a customised investing strategy must be formulated, at the start, based on the HNWI’s preferences and risk profile. This ensures that the investment manager considers the short and medium-term portfolio value fluctuations that the HNWI is willing to accept, and the individual is free from the burden of making investment decisions.
A key benefit of using professional investment managers is their ability to minimise, often avoiding entirely, emotionally-driven decisions typically made by self-directed investors. During periods of heightened economic uncertainty and market volatility, there is a herd instinct of getting caught up in media hype or fear, which can lead to untimely buying or selling at the peaks and valleys of financial cycles.
“In this era of greater market uncertainty and lower returns, I believe a transactional approach to investing will not necessarily grow our clients’ wealth in a sustainable manner over the long term,” says Dato’ John Chong, Group CEO of Community Financial Services (CFS) at Maybank.
Active monitoring of a portfolio is especially important during this challenging period but it is only successful if the herd behaviour impulses are managed. Professional investments managers take a systematic and structured approach to navigate the changing tides of a volatile landscape, often with time-tested solutions and are especially skilled at keeping emotions from affecting their decisions.
Holistic wealth management with award-winning Maybank
Demand for Private Mandates in Asia has gained traction in recent years as HNWI are increasingly moving away from a transaction-based mind-set and are considering a more holistic approach to financial management.
As the country’s largest bank, Maybank has the financial resources, decades of industry and regional expertise as well as trained human capital to manage Private Mandates, coupled strong financial expertise with incomparable local know-hows. Maybank is also backed by an extensive range of business units and its wide presence across ASEAN to offer top-of-the-line customer service, making it named the best private bank in Malaysia by Euromoney and Asiamoney.
At Maybank, Private Mandates are executed based on an investor’s personal risk profile, investment objectives and intended time horizon. Our investment managers recommend an investment strategy and asset allocation that will suit the investor’s unique needs and personal circumstances. Investors are given a concise view of their assets as well as access to the investment management team.
Maybank clients receive meaningful insights on emerging investment themes and market developments, including but not limited to key events, regular portfolio reviews and performance updates. With its mission to humanise financial services, Maybank seeks to inculcate the long term discipline needed to remain invested via institutional investment solutions, especially during volatile market conditions.
Evolving from sales to wealth management
Private Mandate structures align an investor’s interests with the wealth manager’s as both parties work towards the common goal of growing the total wealth over the long term. This is in contrast to a transactional fee approach where the service provider is incentivised to carry out transactions, which often can be in conflict with the investor’s objective of long-term wealth accumulation. (See Table 1)
Table 1. Key differences between discretionary Private Mandates and Unit Trust Funds
| Discretionary Private Mandates | Unit Trust Funds |
| Customised to the investors’ needs | Ubiquitous. No flexibility to customise its strategy according to individual’s needs |
| Full portfolio transparency and reporting | The net asset value and top ten holdings are provided |
| An absolute return focus, with a dynamic allocation to cash as downside risk management tool | Performance is compared to a benchmark and there are limitations on its allocation to cash |
Dato’ John Chong believes that the launch of Maybank’s Global Private Mandate solutions is a timely development for the bank’s wealth management business.
“The recent sell-offs in the market have left investors waiting on the sidelines, possibly missing out on good investment opportunities that may still be present in an unpredictable market. By offering Private Mandates as a wealth solution, we can offer greater potential to investors that are looking for strong, long-term investment returns regardless of market conditions, as well as peace of mind that their assets are in safe hands,” said Dato’ John Chong.
The launch of a global private mandate
To meet the growing demand for private mandates, Maybank offers global private mandate solutions to High Net Worth (HNW) clients who wish to diversify their portfolios and seek exposure to global equities. Customised to suit HNW investors’ preference for tailor-made transparency, these solutions offer an emphasis on absolute return, downside risk management and legacy planning in keeping with market conditions.
Maybank has established long-term strategic partnerships with global asset managers to deliver innovative investment solutions to increasingly sophisticated investors that are looking to access global markets.
Two such portfolios were recently launched by Maybank in collaboration with Schroders, a global investment manager with GBP389 bil (in assets under management): the Global High Dividend Equity Portfolio and the Global High Conviction Portfolio. The former targets investors seeking attractive dividend income from global equity markets while the latter invests in fundamentally strong companies around the world with strong growth prospects and potential for capital appreciation.
The Global High Dividend Equity Portfolio has returned 6.9% per annum in USD terms since its inception in May 2012 while the Global High Conviction Portfolio returned 7.0% per annum in USD terms since May 20161. It shows that both Private Mandates exhibited strong downside resilience through the dynamic use of cash to mitigate market downturns and by investing in stable-yielding blue-chip companies.
Maybank believes these offerings are here to meet the demand for sophisticated, outcome-oriented global investment solutions among HNWI in Malaysia, to grow their wealth in a more sustainable manner.
1Source: Schroders, as of 31 Dec 2018. Performance figures are for similar representative portfolios managed by Schroder & Co. (Asia) Limited that were incepted in May 2012 and May 2016 respectively, gross of fees and expenses. These performance figures are provided for illustrative purposes only, and may not be representative of the actual performance of these portfolios. Past performance is not indicative of future performance.
For more information, kindly visit www.maybankprivatewealth.com
