Rich investors - burnt by the financial crisis - are locking up their money for as long as five years with simple structured products which pay relatively low returns.
According to HSBC, high net worth individuals (HNWI) - who own more than $1 million in assets - account for more than 40 per cent of the sales of its Guaranteed Saver Plus.
Launched a few months ago, the product which pays up to 2.75 per cent per annum mimics a safe deposit of five years tenor, said one banker.
In the past, HNWIs - often seen as sophisticated investors - were not the obvious buyers of investments which locked them in for several years by paying low returns of less than 3 per cent.
But given today's miniscule rates of return on fixed deposits, HNWIs see plans such as Guaranteed Saver Plus as 'options to reduce risk exposure in their portfolios and protect their wealth in the current market environment', said Sebastian Arcuri, HSBC Singapore's head of personal financial services.
The product is actually a capital guaranteed, five-year endowment plan that offers yields of up to 2.75 per cent per annum.
He also added that both HNWIs and mid-market investors were now looking for products with 'guaranteed capital and guaranteed yield'.
Since its launch, it has sold average premiums of $50,000 though some have invested as much as $500,000.
Millionaires have been hit hard by the financial crisis. A recent study by Merrill Lynch and Capgemini showed that the total number of HNWIs in the Asia-Pacific dropped by 14.2 per cent last year.
The latest World Wealth Report found that global HNWI portfolio allocation rose to 50 per cent in fixed-income and cash-based investments in 2008. Concurrently, equities dropped from 33 per cent to 25 per cent of portfolio allocation, indicating a 'flight to safety' during a year of global recession.
HSBC is not the only bank to offer such financial instruments. OCBC's two-year, 2 per cent fixed-return Single Premium Plan has received such a positive response that the bank has rolled out its 'third tranche in less than two months', said the bank's head of wealth management Lim Wyson.
More recently, POSB's Invest SingGrowth Account, a five-year structured deposit with a first-year payout of 2.78 per cent, was launched on June 18, 2009.
Both banks declined to comment on how popular their deposits were with HNWIs.
Wealthy investors looking for an alternative to unpredictable stocks here will be hard-pressed to find a better fixed-income deal.
Of the three banks, OCBC has the highest interest rate for a time deposit - 0.8 per cent per annum for a 36-month period.
Still, the prospect of a guaranteed return may not attract some.
The World Wealth Report predicts that HNWI equity allocation will rebound to 28 per cent by 2010, as the global economy begins to rehabilitate itself.
Says local investor Louis Foo: 'Even a boring stock can give a higher yield than 2 per cent.'
