One of the most persistent disconnects in wealth management is the gap between a fund that secures approval and a fund that attracts sustained client money. Platforms across Asia carry approved lists considerably longer than the number of strategies that genuinely get used, and the reasons have less to do with performance than with portfolio fit, distribution capacity and whether anyone can explain the proposition in a single sentence.
At the recent Hubbis Investment Forum in Hong Kong, the second panel of the day examined what is actually entering private client portfolios as opposed to what is merely available. Gabriel Chan, Managing Director and Head of Investment Services for Hong Kong at BNP Paribas Wealth Management, approached the question through an analogy drawn from football, arguing that the decision to onboard a strategy and the decision to deploy it are separate exercises governed by different logic, and that conflating the two is why so many approved products go nowhere.
Key Takeaways
- Onboarding Is Recruitment, Not Selection: Chan likened fund approval to signing a player and due diligence to the medical, while noting that whether the player features each week depends on the opposition and the rest of the squad.
- Fit Beats Merit: In his framing, the relevant question is not whether an investment is good in isolation but what role it performs within the client’s portfolio.
- The Rate Outlook Has Reversed: Chan described the interest rate and inflation outlook as having turned almost 180 degrees this year, changing how clients are positioned in fixed income.
- Hedge Funds Are Taking the Flow: Macro-driven and equity long and short strategies are drawing interest, alongside multi-asset funds for clients who cannot rebalance quickly themselves.
- Approval Without a Gap Is Wasted Effort: His team assesses new funds against an identified portfolio or performance gap, rather than onboarding for the sake of breadth.
The Medical and the Team Sheet
Asked what it takes for a strategy to move from consideration to approval, Chan reached for the comparison that framed much of his contribution.
“I’m a big football fan, so I think it is more like every year the football club decides to bring new players,” he said. “Just like us, we bring new funds. However, of course we’ve done our due diligence, so we do the medical to ensure that the player is healthy and is productive for the team.”
The important part came next. Signing a player establishes only that the player is fit to be selected. “When you look at a player who plays week in, week out, it depends on which team we’re playing against, and whether other players are favourable in the team as well.”
The translation into portfolio terms is direct. “It’s all about the client portfolio, not necessarily just about any individual investment, whether it is good or bad,” Chan said. “It’s about how they fit in, what kind of functions, what role do they play into the team.”
That reframing matters because much of the industry conversation around fund selection is still conducted in absolute terms, as though there were a league table of strategies waiting to be ranked. Chan’s point is that the ranking changes with the fixture.
A Reversal in the Rate Outlook
On what is actually receiving allocations, Chan confirmed that alternatives are central, with hedge funds the standout, and he tied the shift to a specific change in the macro picture.
“One particular investment perspective that changed to almost 180 degrees is the interest rate inflation outlook ever since the conflict in the Middle East,” he said, noting at the time of the discussion that markets were contemplating the possibility of a rate increase in the days that followed.
That reversal has consequences for the part of the portfolio clients tend to treat as settled. “That has changed also in terms of how clients are positioned, especially with the fixed income side of the portfolio,” he said.
The response has been a pivot towards strategies that do not depend on a directional rate view. “We are seeing a lot of interest into hedge funds, particularly macro-driven as well as equity long-short. It’s an area that we are seeing more and more attractiveness.”
Alongside that, Chan pointed to renewed traction for multi-asset and strategic asset allocation funds, driven by a practical constraint rather than a conviction call. Many clients cannot adjust their portfolios at the speed conditions now demand, and instead “rely on fund managers to help them to readjust the portfolio in terms of strategic asset allocation.”
Where the Money Is Coming From
The chair pressed the panel on a question that often goes unasked: if alternatives are being added, what is being removed to make room.
Chan’s answer was that his business has been fortunate on this front. “We’re grateful that we have received quite a lot of new money from the clients,” he said, adding that positive investment performance earlier in the year had supported reinvestment demand.
Where money is rotating within existing portfolios, the direction is consistent with his read on rates. The flow is “from fixed income pockets into something that’s uncorrelated or less correlated to the existing portfolio,” he said, with hedge funds the principal beneficiary.
He also offered a candid assessment of the starting point. “In Asia, the degree of diversification is still not up to the optimal,” he said, which implies the current rotation has further to run irrespective of the rate cycle.
Assessing the Illiquidity Premium
Chan maintained that an illiquidity premium still exists, but cautioned that investors should not take it for granted. The question is whether the compensation for accepting illiquidity is sufficiently attractive in prevailing market conditions.
The required premium is relative to the opportunities available elsewhere. The stronger the performance and return potential of public markets, the higher the premium investors are likely to demand from private assets to compensate for the additional illiquidity.
The actual degree of illiquidity also matters. Some open-ended funds may offer less liquidity than they did previously and may therefore need to provide a higher illiquidity premium to remain attractive to investors.
Diversification is another consideration. One of the key rationales for investing in private assets is their potential to deliver returns that are less correlated with public markets. Yet certain private investments, including private equity in technology- or AI-related companies, can in practice be highly correlated with their public market counterparts. Investors need to take that correlation into account when deciding what illiquidity premium they require.
Why Good Funds Sit on the Shelf
The closing question turned to the implementation gap, and specifically why strategies with strong track records sometimes fail to attract support from relationship managers and investment counsellors.
Chan’s first answer was about explicability. “RMs and ICs are keen to sell anything that they can explain in one simple sentence,” he said. “Clients should never invest in something that they don’t understand at all.”
His second was structural, and here the football analogy returned. Some platforms, he suggested, adopt a supermarket approach, carrying as much as possible. Others resemble a well-resourced club that has signed far more players than can realistically take the pitch, knowing only eleven will play.
His own team works from the opposite direction, starting with the portfolio rather than the product. “Whenever we assess a new fund coming in, we try to see whether they address the question of whether it’s a gap or if it is a performance gap when we build our clients’ portfolios.”
That discipline then shapes distribution. Knowing the target clientele allows the team to approach the relevant relationship managers with a specific case, telling them the fund can improve outcomes for their particular book rather than simply announcing an addition to the list.
His conclusion was the sharpest line of the session. The objective is to address an identified need, he said, “instead of onboarding the fund for the sake of onboarding.”