New Delhi, May 6:

Wealth managers see greater potential in China than in India and are ready to recommend alternative investments like hedge funds to boost investor returns, according to a survey.

China has the rosiest prospects of any wealth market in Asia, said the poll of 73 wealth managers in Europe, Asia and the US that oversee more than five trillion dollars. Some 80 per cent of those canvassed in the survey by British investment bank Barclays Capital forecast at least 16 per cent annual growth in the assets run by wealth managers in China.

But fewer of the respondents were as upbeat about India, with 60 per cent expecting assets managed by its wealth experts to increase at least 16 per cent annually.

“The overall outlook for wealth generation in Asia is strong while confidence in China is higher than ever,” said Peter Hu, a top investment manager at Barclays Capital. “They are still bullish on India but less so than on China,” he said.

Barclays Capital forecast economic growth in Asia, excluding Japan, of 8.2 per cent for 2007. China posted 11.1 per cent growth in the first three months, and India is expected to grow by around 8.5 per cent in the year to March 2008, down from an estimated 9.2 per cent the previous year.

Asian investors are becoming increasingly ‘happy to take on non-traditional investments’ such as hedge funds, private equity and property, Hu added. Hu said many so-called traditional asset classes, like the stockmarket or bonds, were near all-time highs.

“They’re not compensating investors as much as they have before so they’re looking for other kinds of investments to sustain their return profile.” The trend toward alternative investments reflects a rising ‘level of sophistication among investors in the region’ and a higher “level of younger money being made by entrepreneurs,” Hu said.

“They understand risk” and are ready to “look at new ways to gain returns,” he said. “It’s a positive for the region, helping to increase diversification and absorb liquidity,” he added, forecasting that alternative investments will become “mainstream products over the next two years.”

Right now, equity-linked produ-cts, or equity derivatives, are most popular alternative portfolio inve-stments, with foreign exchange-linked products second, the survey found. “With increased liquidity and transparency, the derivatives market is set to grow,” Hu said.

Until a few years ago, it was hard for private Asian investors to buy such products, but investment banks have begun marketing them to retail investors.

The survey found 88 per cent of respondents expect the hiring and retention of staff to be their biggest challenge over the next two years in an increasingly cut-throat market for qualified staff as Asia’s wealth management industry grows.