Asian investors identify path to future growth

• Investors in the region expect to significantly increase engagement with international finance centres as they look to structure growth
• Large corporates (36%), institutional investors (26%) and high net-worth individuals (also 26%) all plan to increase their use of IFCs in next 12 months
• Trend could accelerate in the Covid-19 environment as investors look to protect assets

Investors across key markets in Asia – including China, Singapore, Hong Kong and Vietnam – are increasingly turning to international finance centres (IFCs) for the protection and risk mitigation of their assets, according to research commissioned by BVI Finance.

A considerable cohort of institutional investors, high net-worth individuals (HNWIs) and large corporates are already engaged with IFCs and a significant proportion expect to do so in the near future, according to research, conducted by East & Partners, a leading specialist business banking market research and analysis firm.

More than a third of institutional investors already using IFCs

The use of IFCs is already commonplace in various Asian markets, with institutional investors leading the way with more than a third (36%) currently benefiting from engagement.

These investors cite risk management and international portfolio management as their main reason for using an IFC and see their biggest opportunities in the year ahead coming from emerging markets (47%) and China’s Belt and Road initiative (44%).

Existing engagement with IFCs by institutional investors is strongest in Hong Kong (64%) at present, followed by Singapore (47%), China (24%).

A fifth of large Asian corporates benefit from IFC usage and many more plan to engage further in the future

Among large corporates in Asia, 20% currently use IFCs and a further 36% actively plan to engage in the next 12 months.

The most common type of IFC entities that are being deployed by corporates are trust structures (65%) and business companies (55%) and this type of investor is expecting an average of 31% growth in their IFC business investments in the coming year.

The top four perceived strengths of IFCs among large corporates are multi-jurisdictional coverage (36%), a single administrative hub for offshore business assets (30%), regulatory consistency (20%) and the availability of experienced management within the IFC (20%).

Existing use of IFCs among large corporates in Asia is most common in Hong Kong (32%) and Singapore (28%). Future usage is forecast to grow the most in Singapore, with 48% of Singaporean corporates actively looking to use IFCs.

Almost half of Asian HNWI investable assets managed through IFCs

Wealthy individuals in Asia are alive to the possibilities afforded by IFCs, with 48% of investable assets currently managed through IFC entities.

Asset management and the ease of investing are among the key benefits cited, with use most prevalent in Hong Kong (53%), China (40%) and Singapore (30%).

Many HNWIs from these markets not currently using IFCs are planning to ramp up their involvement in the near future, with 35% from Hong Kong actively looking, followed by Singapore (32%), China (23%) and Vietnam (15%).

Elise Donovan, Chief Executive Officer at BVI Finance, said: “In a world where managing and mitigating risks is of paramount importance it is clear that major groups and significant individuals in Asia plan to significantly increase their use of international finance centres, especially as the valuable role they can play in unlocking opportunities in a globalized world is recognised.

“The research shows that the British Virgin Islands (BVI) is often at the forefront of minds for these crucial segments. This is because of its reputation as an international investment and trade hub that adheres to all global standards, deploys leading-edge technology for clients and compliance and attracts and retains a dynamic and internationally minded talent pool.

We are also top of the agenda for many Asian investors due to the market’s confidence in the BVI and the long-standing role we have played in the region’s growth over the last three decades This is now all about how BVI can help structure growth in the future and we look forward to further developing these relationships and partnerships in future.”

Paul Dowling, Principal Analyst at East & Partners added: This research is significant as, for the first time, we have talked to the asset owners themselves and in large numbers. From those we interviewed, it is clear that safety, reliability, trust and confidence are critical factors that can be found via established international finance centres, such as the BVI, which have developed partnerships in Asia.”

The key findings for the three groups – HNWIs, large corporates and institutional investors – are available on request.