Liu Minxia

    mllmx@msn.com

    THE time has come for Chinese investors, especially high net worth individuals (HNWIs), to build their international investment portfolios to maximize returns, instead of putting all their eggs in one basket, an industry leader warned.

    “Decades of observation [of the wealth management sector] has given me the insights that the era of global investing, long-term investing and alternative investing has started,” Tang Ning, founder and CEO of CreditEase, told investors in an event in Hong Kong last week.

    China’s population of HNWIs swelled to more than 1 million in 2014, doubling from four years ago, according to the China Private Wealth Report 2015, developed by Bain & Co. in collaboration with China Merchants Bank.

    Major problems with China’s HNWIs’ investment allocation is that they have too much allocated to fixed-income assets, real estate and yuan assets, which are exposing them to high risks when the economy has slowed down, according to Tang.

    A matter of top priority China’s HNWIs, defined as individuals with at least 10 million yuan (US$1.6 million) in investable assets, should consider is how to preserve their wealth and pass it on to their offspring in a responsible way, said Tang, who started CreditEase, now one of the biggest microcredit and wealth management firms in China, 10 years ago and had its peer-to-peer lending arm Yirendai listed on the New York Stock Exchange last year.

    Setting up a family trust will become a must for China’s HNWIs to preserve and pass on wealth, with major benefits including protecting wealth from being affected by failed business operations and realizing long-term growth, Tang said.

    Tang cited the case of Chinese actor Wang Baoqiang as an example, saying Wang’s wealth won’t be affected by his divorce like it is now, if he had set up a family trust.

    Wang’s case, which is still going on, has drawn unprecedented attention to the family trust business in China. Family trusts emerged in China about three years ago while a few trust industry leaders rolled out the services.

    Not only public figures, but also every HNWI in China should consider setting up a family trust, said Tang, who expected the family trust business to take off in the next few years.

    Tang’s views are echoed by Bain’s research, which found that “wealth preservation” remained the top wealth objective for nearly two-thirds of the HNWIs surveyed, followed by “wealth inheritance,” which surged from the fifth priority in 2013 to second last year, particularly among the ultra-HNWIs.

    Bain also found that wealth inheritance has taken on new meaning beyond passing on material wealth and financial planning. Sixty-five percent of the respondents said they also want to leave a legacy of spiritual wealth, including instilling a strong work ethic, the importance of education, family values, etc.

    “Among China’s newly rich HNWIs, we’re seeing a more aggressive investment style, an openness towards alternative investments and increased focus on wealth creation, second only to wealth preservation as their primary wealth management objectives,” said Alfred Shang, a Bain partner and co-author of the report.