Archives » 2006 » Issue 38 (March)

Growth, growth and more growth are clearly the top three strategic priorities for wealth managers in 2006. Several international players announced global initiatives last month, including AIG, BNP Paribas and, of course, Credit Suisse and UBS. Even Barclays, which has long punched well below its weight on the international wealth management stage, may be starting to look at the global picture.

A shift in thinking by major European banks has opened the door

to new partnerships and a rise in specialist sub-advisory deals

— Davies: funds are a new way to access propety market

The recent proliferation of property funds is offering European distributors the means to tailor investors’ portfolios to their differing risk profiles, using an asset class previously considered highly illiquid.

Tom Sowanick, the modest chief wealth management strategist at Merrill Lynch Global Private Clients would have you believe that his team has little to do with product creation. However, his ideas and predictions have a wide-ranging influence, both within his firm and on the competition. Yuri Bender reports

Communication between Tom Sowanick’s research unit and the FAs who advise and sell products to private clients “happens in multiple forms.” In addition to his monthly written “Ric Report”, communicating the views of the bank’s Research Investment Committee, he is involved in multiple seminars and conference calls.

ING IM may be Holland’s largest fund house, but it is seeking to have a broad relationship with mid-tier distributors rather than one big score. It claims to offer comprehensive open architecture solutions, writes Elisa Trovato

High dividend funds have drawn considerable attention from distributors, according to Nicolas Simar, head of value strategies at ING IM.

It’s all very well having an innovative product, but the next challenge is persuading often sceptical client advisers that your strategy is relevant to them. Yuri Bender looks at the varying approaches taken to sway them across to your way of thinking

The post-Ucits III environment has opened a door to a new investment vehicle in the form of alpha-generating absolute return strategies. But, as these are unchartered waters, which pioneers are willing to take the plunge? Elizabeth Cripps provides the answers

There are many strategies to take into account when investing in hedge funds and, by spreading their exposure across a diverse range and against bond and equity indices, investors can use alternatives to optimise reduction of portfolio risk, as well as gain additional alpha

Given the expectations for a prevailing low-return environment and the increased fear of capital losses, investors’ attention is increasingly turning away from relative performance and moving towards absolute returns. But what are the merits of absolute return strategies and how can long-only investment houses structure their products with the aim of providing both long-term positive returns and shortfall protection?

— Aldrich: system not miracle worker, but a good starting point

As the fund of funds structure of hedge funds quickly becomes one of the most popular forms of entry, The Bank of New York is offering a technological starting point for addressing the complex relationship between the manager, prime broker and administrator. Alison Ebbage offers an insight into the new system

As hedge funds extend into the broader marketplace, the Bank of New York is seeing its client based broaden away from pension funds and insurance companies to include private banks looking to create their own fund of funds.

— De Ternay: transparency is a non-event

The technological implications of MiFID may bounce off the the already advanced big players on the buy-side, but the smaller firms and those on the ‘front line’ of the sell side will be hit hard by the IT investment. Elisa Trovato reports

The past four years has seen impressive performance for European small-cap funds, yet they still cannot beat the indices. A change in focus is needed, writes Simon Hildrey

With the advent of an 'open-architecture' environment, many investors are seeking solutions that may increase their portfolios' performance. Improving the efficiency of a portfolio is a constant challenge in today's environment and one that is pushing investors to consider new asset classes and techniques in order to acheive superior portfolio efficiency.

“The balanced portfolio remains basically unchanged this month. Though it is more rewarding to be invested in stocks rather than bonds, from a risk return point of view, stock markets may be heading to some kind of setback in the short run. The returns have been largely impressive on many asset classes, in Europe or in the emerging markets; the US is still lagging and Japan at last witnessed a brutal and long awaited halt in its stellar progression. Going forward, a reasonable pause in the stock market progression could lead us to increase our equity holdings, probably in some emerging markets.”

“The strong equity run suits our strategy and the majority of our fund selections were on the right side of sector averages. If US rates peak in Q1 this may provide further reason to add to equities, so for now we hold onto our pro-equity, overweight emerging markets stance. We swap Franklin Mutual Beacon for Merrill Lynch Flexible US Equity, taking some profits from Legg Mason to further add to this new position.”

“Most equity markets have made further strong gains in January as conviction grows that 2006 will be another year of syncronised global growth. The eurozone and Japanese growth is accelerating, while the US economy remains firm after the Q4 hiccough in consumer demand. A period of consolidation is possible after such a broadly based rise, especially if the renewed strength in oil prices is sustained. If economies continue to cope well with high energy costs, equities remain attractively priced.”

“Due to the latest rally on stock markets we took some profits by reducing the Magna Global Emerging Markets Fund, which had shown a strong performance over the last months. The generated liquidity was invested into the Global CC Ami fund, which follows a strategy of writing covered calls on European equities.”

“Our market view remains globally unchanged, with a positive stance towards equity, supported by sustained growth, low inflation, ample global liquidity and moderate valuations. The diversification role played by our energy and mining equity investments within the portfolio has been especially evident in January; they helped reduce portfolio’s volatility and had a significant contribution to performance. On the fixed income side, the structural forces holding down bond yields may persist so we don’t expect much rise in global yields.”

“US managers again receive less equity allocation, as we instead decide to up our percentage to Europe, UK, Asia and emerging markets. We added the Orbis Japan fund to the Japanese equity portfolio. Orbis Japan receives particular attention from Alan Gray (Orbis’ founder and chairman) himself, and as such has the benefit of his significant experience and expertise. All of the Orbis funds are built around a proven stock picking process that has delivered excellent alpha over many years. The focus on margin of safety has historically provided substantial downside protection.”

Each month in PWM, six top European asset allocators reveal how they would spend E100,000 in a fund supermarket for a fairly conservative client with a balanced strategy.