Transcript of the video
Hello, my name is Grace Tam, and I am Chief Investment Advisor for BNP Paribas Wealth Management based in Hong Kong.
Today I would like to tell you a story about how we helped a Family Office to restructure a leveraged portfolio that had a bias towards growth and tech funds during a challenging market environment in 2022. Our experts carried out a holistic top-down strategic asset allocation analysis, and then based on our Global Chief Investment Officer’s macro and tactical asset allocation views we proposed bottom-up product solutions.
This story is a good illustration of how BNP Paribas Wealth Management’s Solution- and performance-driven approach benefited our clients.
The clients had some key concerns: on the one hand, the risk of margin calls, given the downside potential of risky assets. As a reminder, a margin call is a request for extra cash or securities acting as a deposit to cover possible losses and to meet minimum capital requirements.
Their other concern was the portfolio yield which was not sufficient to cover rising interest costs during the fast interest rate hiking cycle.
How did we address these concerns?
Firstly, by drawing on BNP Paribas Wealth Management’s proprietary portfolio simulation tool, known as “Strategic-A”, we helped our clients to optimise their portfolio with an income focus, while taking into account their targeted expected return for the long run.
Secondly, we advised the clients on a tactical asset allocation, based on the Global Chief Investment Officer’s macro and asset class outlook, which was overall more defensive during that time amid heightened market volatility.
What was the outcome?
In our proposed portfolio, we included income-focus solutions recommended by our product teams. Then, we estimated the income distribution and the debt costs. We also did a series of stress tests to give our clients an overall picture of how we had improved the new portfolio’s cash flows and had also Lowered the risk of margin calls [in our base-case and worst-case scenarios] in both our base-case scenario and our worst-case scenario, compared with the existing portfolio.
We managed to capture the short-term market rebound at that time to switch some of the growth-oriented funds with a low financing ratio for income-oriented funds with a high financing ratio and decent income distribution.
I am delighted to say that the clients were very satisfied with our timely adjustments to their portfolio, because in the period following our portfolio restructuring, there was indeed further downside in risky assets, and the central banks made aggressive rate hikes.
The use of our “Strategic-A” tool as well as the CIO team’s views on actionable product solutions enabled us to address the clients’ concerns and offer them the best service.
In conclusion, this story illustrates the guidance that BNP Paribas Wealth Management provides to our clients via an approach that focused on understanding the needs and seeking the most appropriate solutions.
By combining an innovative Strategic Asset Allocation tool, our Chief Investment Officer’s macro and tactical views, our proven expertise and our credit analysis, we were able to offer tailor-made investment and financing solutions to our clients while meeting the very specific needs of this family office. Moreover, top-notch advisory, fast delivery and the expertise of our teams were paramount in that particular market context.
Thank you for your attention.
If you need any more information about our products and services, please contact your relationship manager or visit our website.