A positive outlook for 2023
After a challenging year for both equity and bond markets for much of 2022, Laurent Ramsey, Managing Partner of Pictet Group observes that Pictet started seeing clients taking risks again during the fourth quarter of last year, with resilient demands for thematic equities. Pictet also saw a renaissance of appetite for fixed income. Laurent Ramsey thinks it’s highly unlikely that 2023 will experience downturns similar to those of 2022. From a global market perspective, for bonds and equities, he expects mid-single digit returns. As borders reopen in the region, he’s confident that Pictet Asset Management will continue to win more Asian businesses in 2023.
As a Managing Partner who also co-heads Pictet Asset Management, Laurent Ramsey says that despite 2022 being a challenging year, due to high correlations in performance between all asset classes, Pictet Asset Management managed to finish the year with positive net new money. Clients have also expressed interest in discussing investment strategies for the new year, and the slightly more positive outlook is generating conversations with new clients.
Renaissance of fixed income
In terms of clients’ near-term investment appetite and preference, Laurent Ramsey explains that thematic equity funds have been quite resilient in terms of market flows. These funds are one area where more and more capital is being allocated by both retail and institutional clients.
He elaborates that thematic equities require a long-term horizon, and if an investor’s time horizon is less than seven years, they may as well consider an ETF instead. Large investors have also favored Pictet over the years for being an active manager.
According to Morningstar’s “Global Thematic Funds Landscape” report released last year, Pictet Asset Management remains the largest thematic equity fund provider globally by AUM as of the end of 2021.
On the bond side, after years of negative yields we are now in a situation of positive real yields, following the rate hikes by the Fed and other central banks. Laurent Ramsey says there’s a renaissance of appetite for fixed income.
Resumption of in-person meetings will help attract new clients
Within Pictet Group, Laurent Ramsey shared that the overlap between Pictet’s wealth management (WM) and asset management (AM) businesses is very small – the WM side represents only 12% of AM’s assets, and less than 10% of its revenue. Sovereign wealth funds, pension funds, public and private financial institutions and insurance companies make up most of the AM’s clients. He explains that their clients tend to turn to institutions they trust. They like to work with Pictet, and won’t be pressured by short-term volatility which is usually good for business.
With the re-opening of Greater China, Laurent Ramsey says coming back to Hong Kong and being able to visit clients in person are huge benefits. He admits that gaining new clients in Asia during the pandemic was a bit more complicated, as personal visits were not possible. In a business of trust such as financial services, it is quite difficult to achieve trust through online interactions only.
Laurent Ramsey believes that human capital is critical for continued business development and 2021 was one of the highest hiring budgets for Pictet, which allowed the group to hire the talent they wanted. In 2022, Pictet Asset Management was able to retain and develop these new hires despite the high level of market stress. Pictet tends to have a much higher retention rate than other firms in the business.
Pictet’s objective to participate in the retail mutual fund market in China
As China continues to open up its financial market in recent years, it is aiming to attract more foreign institutions to develop the onshore businesses in China.
Laurent Ramsey says that Pictet Asset Management has established an office in Shanghai, with a team of equities and fixed income analysts for the group. Pictet helps Chinese investors access overseas investment strategies via programs such as the Qualified Domestic Limited Partnership (QDLP). Looking ahead, in three to five years, the company plans to participate in the retail mutual fund market in China.
Laurent Ramsey mentions that China is one of the fastest growing markets in the world in terms of wealth creation.
Even though China has been included in major bond and equity indices, China still represents a relatively small proportion of these worldwide indices. As more global capital continues to flow into the Chinese market, this will bring more business opportunities for Pictet Asset Management.
Asia is a key region for growth for Pictet Asset Management. Apart from China and the ASEAN markets, Laurent Ramsey says there are also many opportunities in Japan, where there’s an existing pool of massive wealth that needs to be deployed in capital markets. It’s still sitting mainly in Japanese government bonds and cash deposits.
Pictet Asset Management Asia ex Japan grew 50% in the past three years
Junjie Watkins, CEO Asia ex-Japan at Pictet Asset Management, says that in the past three years, the assets under management of Pictet Asset Management ex-Japan has achieved growth of nearly 50%, and is confident and optimistic about further consistent growth in the years ahead.
Original interview in Chinese published in Hong Kong Economic Journal, Monday 6 February 2023. Translation to English by the Pictet Group.