Liu Minxia

    mllmx@msn.com

    EVENTS that are rare and difficult to predict are redefining the world and offering strong implications for markets and investments that diversified portfolios are the way out, a weekend forum on wealth management was told.

    Recent examples of these kinds of events, dubbed “black swans” by writer Nassim Taleb in his book, “The Black Swan: The Impact Of The Highly Improbable,” include Brexit and Donald Trump’s win in the U.S. presidential election last year, both of which resulted in volatility in global financial markets, Stephen Harper, former Canadian prime minister and president of Harper and Associates Consulting, told the forum hosted by Chinese wealth management firm CreditEase on Sunday. Nearly 700 Chinese high net worth individuals (HNWIs) attended the two-day forum, which, Harper said, he had rarely seen previously elsewhere.

    Black swans can wreak havoc on any portfolio as they are unpredictable, but speakers of the forum agreed that there are discernible traits common to black swans that can inform investment strategies in a helpful way.

    Changes, which are indisputably eternal and immortal, are made by people who are leaders in their fields, said Ram Charan, a world-renowned business advisor, author and speaker who has spent the past 35 years working with many of the world’s top companies, CEOs and boards. These leaders, according to Charan, can think beyond their companies and even countries to look for opportunities.

    Charan, who announced during the forum that he will bring his Ram Charan Management Practice Award to China with the help of CreditEase and the Chinese version of Harvard Business Review, advised Chinese investors to broaden their investment horizon.

    Tang Ning, founder and CEO of CreditEase, agreed with him, saying investors should avoid putting all their money in one place, one sector, or even in one country in the face of global uncertainties.

    “The three golden rules of portfolio diversification we brought up last year have been proven to be effective, and they are investing globally, investing across asset classes and alternative investing through fund of fund (FOF),” said Tang.

    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 slows down, according to Tang.

    A balanced portfolio Tang suggested to China’s HNWIs, defined as individuals with at least 10 million yuan (US$1.6 million) in investable assets, can vary with different investors, but he recommended a portfolio consisting of 20 percent stocks, 20 percent properties, 5 to 10 percent in insurance, 20 to 30 private equities and 30 percent in cash and fixed-income assets could be appropriate for many.

    Tang started CreditEase, now one of the biggest microcredit and wealth management firms in China, 11 years ago and had its peer-to-peer lending arm Yirendai listed on the New York Stock Exchange in 2015. CreditEase, which services roughly 4 million investors in China, according to Tang, released a private equity FOF in collaboration with IDG, and a property FOF with globally leading developer Tishman Speyer during the forum.

    “Each CreditEase FOF has five to 10 portfolio strategies which help maximize returns and minimize risks,” said Frank Wang, managing director of CreditEase, who is in charge of the company’s intelligent FinTech platform Toumi RA and its stock equity investment arm. Wang said the company has also launched a stock FOF a month ago in cooperation with roughly 40 top fund managers from home and abroad.