DBS Group Holdings saw sales of its semi-liquid fund products to Greater China spike this year and expects demand to remain high as investors boost allocation for alternative assets.
The year-to-date sales of semi-liquid funds to Greater China investors grew 300% compared with a year ago, Carol Wu, DBS head of private banking in North Asia, said in an interview.
The products — some targeting double-digit returns with risks laid out to investors — are managed by asset managers including Apollo Global Management, KKR and Brookfield Asset Management, the bank said.
Semi-liquid funds are underpinned partially by private assets but offer more frequent redemption opportunities than close-ended funds. It allows DBS to sell professional investors products that were previously exclusive to institutional investors.
While designed to match business capital demands with long-term funding, semi-liquid funds can be forced to sell underlying assets if they face concentrated redemptions requests. Such risks were highlighted by the surge in client withdrawals for Blackstone’s real estate fund about two years ago.
The majority of DBS’s private bank clients who invest in private equity products, prefer to buy semi-liquid products that they can access on a quarterly basis, said Wu.
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Private wealth is fueling the growth of semi-liquid funds, which reached a record US$350 billion ($453.63 billion) in assets globally at the end of last year, according to data provider Preqin.
Chinese clients have shifted away from equity-focused investments and increased their exposure to the US and Europe, according to Wu.
DBS has been expanding its private banking division, including in Hong Kong to lure money from mainland China, Taiwan and other North Asia clients.
The company replaced Credit Suisse as the third largest private bank in Asia, excluding onshore China, last year with some US$201 billion assets under management, according to Asian Private Banker.
