Archives » 2007 » Issue 53 (September)

How should distributors and their clients handle a market crisis? There is no shortage of advice from brand conscious fund houses and boutiques with an eye on the main chance

— Camerlynck: market driven by sentiment

Elisa Trovato examines how product providers and banks have reacted to a crisis of confidence

Fianancial institutions need to invest in servicing and acquiring clients and in opening new offices in geographical areas of importance. Elisa Trovato analyses latest reports into the world’s wealthiest individuals

Complementary places are still available to PWM readers who wish to attend the latest in the European Fund Series of afternoon conferences, taking place in Frankfurt at Hotel Hessischer Hof on 26 September.

New transparent methods for collecting data could give a real picture of market share potential for private banking players, writes Ted Wilson

— Abou-Jaoudé: how do we tackle it?

Traditionally Dexia gained the majority of its asset management

business through its Belgian branches, but now it has set its sights on the exciting world of third-party distribution, writes Yuri Bender

In order to further increase profits, one of the key tasks for Mr Abou-Jaoudé, is to boost the size of funds. While he insists there is “no natural size in terms of assets under management” for a group such as Dexia AM, it is clear that his ideal size, to gain better returns on equity, is much higher than at present.

The nimbleness and talent within boutique structures encourage enhanced performance, and the personal touch offered inspires loyalty in their clients. However, the instability of such a small organisation could prove a stumbling block, especially as the big players are getting in on the act, writes Yuri Bender

Expected returns versus actual returns

Portfolios are built on what are believed to be carefully thought out and well-researched ideas. However, investment performance often falls short of expectation and investors are disappointed with the actual returns achieved. Is this because we invest too little too late? Have we become too attached to individual stocks? Are our portfolios not diversified enough?

This gap between expectation and reality is not limited to a few individuals who may perhaps be inexperienced or fall prey to faulty information but is often widespread. This is demonstrated by the formation of ‘bubbles’ in the market – most famously in recent times in the technology sector on the back of the rise of the dot com. Investors both amateur and professional were affected by the subsequent drop – no-one is immune from less than objective decision-making.

European fund houses are waxing lyrical about the potential of 130/30 funds, with the ability to short o­ffering enhanced performance. However, with the plethora of new products flooding the market, some private bankers may adopt a wait-and-see approach. Christine Senior reports

Stefano Pierantozzi, head of EMEA fiduciary oversight and research, at Citi unveils how investment theory developed in order to accommodate the idea of 130/30 strategies and how they can fit into the Ucits Directive. These strategies may not necessarily perform better than traditional ones, but they allow for greater freedom

Weaker equity market returns, increased plan funding needs, and demand for higher and more predictable active manager returns have led to a growing interest in alternative investment approaches. One of the most promising sources of higher alpha that is rapidly gaining appeal is ‘directional long-short’ investing, write Alexander Tavernaro, client portfolio manager, Invesco Global Structured Products Group, Frankfurt and David Wonn, client portfolio manager, Invesco Global Structured Products Group, Boston

Tightening spreads in dollar-denominated debt means that there are few opportunities for growth. However, there may some hope within local currency denominated bonds, writes Simon Hildrey

— Rodley: it is a small and distinguished band

Investors have had access to funds trading shipping equities and derivatives for some time. Now they can push that diversification further with a fund that trades the vessels themselves. Martin Steward reports

— Khezri: you have to believe in the artists

APT pools the work of young artists to help them prepare for retirement. Now it is leveraging its expertise to provide an investment advisory service in this volatile and under-researched sector, writes artin Steward

“During the past month, our balanced portfolio suffered from our credit and equity exposures, due to the recent market correction. Our positions taken on total return strategies and high yield bonds contributed negatively to performance. Our equity funds penalised performance with the major indices slump explained by the fear of equity investors. We decided to maintain our positions. The fundamentals underpinning the equity rise are satisfactory and still in place. We think risky assets, notably equities, can be expected to start to move up again once the present crisis has been digested.”

“We uphold a 10 per cent cash position, hoping to buy cheaply after a possible consolidation. This is backed by our further defensive positions, such as the C-Quadrat Absolute Euro Bond, which in total makes up more than 30 per cent of the portfolio. We have added Threadneedle’s Asia Fund and have deselected Aberdeen Asia Pacific due to a beginning performance lag. Reduced by 5 per cent, but still our core European equity fund is the Coreolan Europe, supported by the new MPC Competence Europa Methodik AMI, which follows a highly convincing value strategy.”

“Anxiety over rising default rates has started to come to the forefront, as evidence suggests there will be a further increase in sub-prime defaults. This news has reduced the buying momentum within the markets as investors take profits and review risk positions. We feel fundamentally the US consumer will continue to spend, given income and employment remains strong. Any equity correction caused by the sub-prime default concern could be a good entry point for more fundamental and value-based investors considering the cheapness of equity markets.”

“This month we added a global equity fund to our portfolio, Long Term Investment Classic Fund of Strategic Investment Advisors. However, our equity exposure has remained the same, as we haven’t modified the asset allocation of the portfolio. The addition derives solely from fund picking, as a result of our research work. We are still monitoring the market, looking for new funds that could be included in our portfolio, especially from smaller and more specialised fund houses.”

“We made no changes to the asset allocation which is 45 per cent equities, 45 per cent alternatives and 10 per cent fixed income. We will use any equity correction to simply rebalance the portfolio to this allocation. We are also satisfied that our managers are delivering good returns despite the turbulent markets and have made no manager changes in the past month. We do not have a crystal ball so it is rather difficult to predict what the immediate future will bring, however we do not believe the current correction (which could be more severe than many are predicting) heralds the beginning of a bear market.”

“Though it is quite unusual for our balanced portfolio, there has been some turnover lately, in both the fixed income and the equity parts. On the fixed income side, we are going for risk aversion as we have sold our whole hard currency emerging debt, which had been in the fund for a long time. On the equity side, we have sold the high income European equity funds and increased the non-European investments. Going forward, we have not turned bearish on stocks. All the trouble over the summer will at some point, create an opportunity.”

“During this summer, equity markets suffered a big shock, and investors were looking for safe-haven assets such as government bonds. After this correction, we favour alternative investments and equities rather than bonds, mostly because equity markets are becoming more attractive in terms of valuation. However, we remain careful about financial equities. In this context, we begin to underweight value stocks for the benefit of growth. Furthermore, we profited from the sale of Renaissance Europe, and we entered a new fund: DWS Aktien Strategie Deutschland. Indeed, we consider that this fund would be better positioned to perform in the coming months.”

“In this high volatility period, the equity weight has been decreased in favour of bond funds and strategies long on volatility. Among equity funds, the tilt is towards growth style, preferably mid-large cap in US market, and technology sector. We have decreased our exposure to energy and materials, as well as to commodity funds. On the interest rate risk, the portfolio remains cautious.”

“Equity markets have embarked upon another correction, as fears grew that credit problems in the US would spread elsewhere and undermine the merger activity which had contributed to their earlier gains. With central banks still sounding hawkish about the need for higher rates, markets fear an undue tightening of credit conditions. Provided that economic growth remains intact – and corporate profitability has so far remained robust – equity markets are likely to recover their poise, particularly if the volatility heads off the risk of higher interest rates.”

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

The availibility of sophisticated software, alongside regulatory demand for more complex master records, has allowed customer relationship management to become more tailored to the client, writes Peter Guest

— Healy: we have a global reach and brand

Citi’s acquisition of Bisys marks a move by the firm to push into the hedge fund admin space. However, it believes that it is posssible to provide a servicing solution for both the long and short worlds. Alison Ebbage reports

Elisa Trovato reviews the responses to this year’s PWM survey, discovers a few truths about brands, boutiques and regional preferences, and reveals the rollcall of Europe’s most popular investment providers

Yuri Bender directs a discussion on the developing issues in the sub-advisory arena. Seven industry players reveal what they demand from their sub-advisers and discuss the battle of the boutiques versus the large houses

GSAM’s European sub-advisory team tells Elisa Trovato about its favoured delegation strategies and why the model portfolio is definitely in and why the currency overlay is out

An absolute return focus sees the firm’s third manager hail from London’s hedge fund stock

Rival Dutch firms benefit from the sale of Läbsförsäkringar’s asset management arm

Benefits of a big company name and backing include quality and stability – and wider opportunities