COVID-19 Changed Wealthy Investors' Preferences: Safe Assets + Fractional Investing + Overseas Real Estate (Comprehensive)

Hana Financial Research Institute, 2021 Asset Management Trend Changes
High-Net-Worth Individuals Expand Cash Holdings and Strengthen Diversification and Overseas Real Estate Investment

[Asia Economy Reporter Kim Hyo-jin] A study has revealed that due to increased market volatility caused by the impact of COVID-19, wealthy individuals have shown a stronger preference for safe asset investments and diversified portfolios. It has also been pointed out that financial companies need to provide more sophisticated, personalized services tailored to individual investors to match these diversified investment behaviors.

According to the financial sector on the 29th, Ha Seo-jin, Senior Researcher at Hana Financial Management Research Institute, analyzed in the recently released report "2021 Asset Management Market Trend Changes" that "due to the influence of COVID-19, the preference for safe assets has strengthened, leading high-net-worth individuals to increase their holdings of cash and cash equivalents while diversifying their assets across various direct and indirect investment products."

He diagnosed that as the demand for diversification increased, the proportion of indirect investments such as funds among high-net-worth individuals expanded, and asset management companies, which have recently faced difficulties due to rising customer churn rates, are showing increased interest in offering related products.

Among domestic asset management companies, 69%?equivalent to 7 out of 10?responded that the recently heightened market volatility and COVID-19 negatively affected customer retention rates, and 67% said this trend increased demand for various fund products.

The proportion of overseas investment assets among high-net-worth individuals has also expanded. According to the report, these individuals showed strong interest in non-residential (commercial) real estate as a major overseas investment asset. Senior Researcher Ha explained that the growth of non-residential assets in countries such as the United States, Japan, Switzerland, and Spain was particularly notable.

Some securities firms have recently accelerated their response by increasing personnel in their overseas real estate investment sales divisions. The general view is that this movement will accelerate further once the global vaccination rollout expands and the COVID-19 pandemic situation subsides.

High-Net-Worth Individuals Actively Adjust Investment Portfolios... Turning to Safe Assets and Diversifying Investments

The adjustment of wealthy individuals' investment portfolios due to COVID-19 was also highlighted in the "2021 Korean Wealth Report," or the so-called "Rich Report," released by the research institute last month. It detailed how the mass affluent with financial assets exceeding 100 million KRW and the wealthy with assets over 1 billion KRW are actively changing the composition of their financial assets.

According to the report, the stock ratio of these groups, which was 16% at the end of 2019, rose to 20% by the end of last year, and the proportion of insurance and pensions also increased from 11% to 17%. The cash ratio also increased from 41% to 46%, supported by a strong preference for bank time deposits and short-term financial products.

When the research institute surveyed the "Top 5" financial products for wealthy individuals' investment plans this year, short-term financial products and bank time deposits ranked highest at 21% and 19%, respectively.

High-net-worth individuals also showed strong interest in overseas stock investments. Instead of holding foreign currency deposits (55%, multiple responses) and foreign currency cash (50%, multiple responses), they are increasing investments in overseas stocks (25%, multiple responses) and foreign currency ETFs (10%, multiple responses).

Senior Researcher Ha predicted that in such an environment, providing personalized asset management services based on digital platforms will become increasingly important to retain existing customers and attract new ones.

He also anticipated that a "multi-channel" approach?communicating with customers not only through face-to-face consultations but also via online, mobile, and video calls?will become commonplace in the asset management business.

This content was produced with the assistance of AI translation services.