Archives » 2007 » Issue 56 (December/January)

Private bankers must be truly well-rounded, able to think strategically and advise on products. And a bit of poise wouldn’t go amiss, either

Today’s wealthy focus on brand and ­individuality when seeking private investment opportunities, reports Elisa Trovato

Graham Harvey reports on the current feeling in wealthy families that the act of giving is as much about investment as philanthropy

While modifying practices in the Italian funds industry to comply with new regulations may prove difficult, there are strong grounds for ­optimism if advice improves, reports Elisa Trovato

A major problem remains asset allocation, with an over-reliance on fixed income and only a quarter of savings managed by fund houses invested in equities. Currently, Italian investor returns are only keeping pace with ­government bonds. Elisa Trovato examines the problems

When Danske Bank made the all-important decision to plump for open architecture, Danske Capital knew that some investment activities would inevitably have to be outsourced. Elisa Trovato investigates

Convincing a client adviser in the private banking world to experiment in new product areas can be a difficult undertaking. Elisa Trovato examines why steering the sometimes sceptical distributor is certainly worth the effort

Recent market movements have had an unsettling effect on some money market funds, and investors found they were carrying more risk than they had assumed. To avoid nasty surprises, you need to ask the right questions of your funds at the outset. These include: is the fund a stable NAV fund? And what of its ­independent rating? Since the term money market fund has been applied to a variety of product, where MMFs are ­concerned, ­information is key, and the key to a sound investment is knowledge.

Foreign firms have made significant inroads into what was once the domain of German funds managers. Yuri Bender reports on an ­industry sector that has historically been seen as protectionist

The tremendous growth in the hedge fund industry over the past decade has encouraged many investment firms to consider the potential benefits of short positions as part of more traditi­onal long-only investment strategies. 130/30 is one of the latest innovations in the asset management industry and has produced a lot of interest among German ­investors lately

The safety of money market funds is proving attractive to investors, and they have been delivering positive returns during the credit crunch, writes Simon Hildrey

Private individual and family office investors stress the importance of the qualitative – even the ‘emotional’ – when it comes to identifying ­investment needs. Martin Steward investigates

Structured entrepreneurial products, offering diversification across ­several asset classes, are among innovations introduced by the team reporting to José Barréiro in the Spanish bank’s new look funds and wholesale banking division, writes Nat Mankelow

“With a market bearish on the ­financial sector and bullish on ­commodity-related assets, we prefer to be well diversified, both on the bond side buying some long duration, together with some diversifying total return products, and on the equity side. On equities, we picked up some active managers on ­sectors such as technology with Vitruvius Growth Opportunities, utilities with ING Utilities, and energy with AMEX World Energy. Moreover, we bought JPM Middle East. We also accumulated some volatility exposure with CAAM Volatility Equities to get some market protection against market collapses.”

“During the month of October, we did not carry out changes to our portfolio. This is attributed to three economic developments. First, the FED’s second interest rate cut in two months drove the euro to a new all-time high of $1.46. Second, the prices for ­commodities such as oil continued to rise. Third, the upward trend of the commodity prices was also reflected by the gold price – more than $800 (U550). In our ­opinion, all these ­developments are exaggerated, so we prefer taking a ­passive and prudential stance with our investments in order to be able to react to potential counter movements.”

“The market continued to gain upward momentum in early October as investors started to ignore the subprime issues and focused on improving company earnings and resilient US growth. However, near the end of the period the subprime issues returned to the forefront of investor’s minds as several high-profile banks reported weaker-than-expected earnings. We continue to favour ­equities, but hold a bias to more active managers who are able to take advantage of the current market volatility.”

“All funds yielded a positive return in October – between 0.7 and 8.5 per cent in absolute terms. The total ­portfolio return was just below 2 per cent. As predicted last month, the bubble in the Chinese equity market expanded further. As a result the CAAM ASEAN was the high flier in the ­portfolio. The current liquidity crisis ­continued, but in spite of this corporate earnings for the third quarter came in at or above expectations.

We maintain the portfolio as it is. The biggest risk in our opinion is a second credit crisis, stemming from ­products with exposure to, among other things, credit card debt.”

“This month we didn’t modify our portfolio. The portfolio is well ­diversified and it should face the recent turmoil in international ­markets without experiencing many problems. In this month, all the funds in the ­portfolio have returned a good ­performance. The best results have come especially from global equity funds and from the emerging markets fund. We are still ­monitoring the market, looking for new funds that could be included in our portfolio. Each potential change in the portfolio will derive solely from fund-picking.”

“Our balanced portfolio suffered from debt and equity exposure over the past month. Corporate and emerging spreads widened in an environment of increasing risk aversion. We increased our duration on long-term euro bonds by cutting our exposure on ­emerging and corporate high-yield (PAM Bonds Higher Yield), and activated a stop-loss on CAAM Dynarbitrage VaR 20, which is positioned against the ­market. We increased holdings on Centrale Long Vol to 6 per cent of the portfolio.”

“The past month saw a significant change to the portfolio as we reviewed every holding as well as our geographical and asset ­allocation. This resulted in a number of changes, such as the introduction of a number of opportunity funds, including SIM Global Best Ideas, where we ­delegate certain short-term tactical asset ­allocation ­decisions to a specialist manager, and the Schroder Agriculture Fund, which ­provides exposure to soft ­commodities. Other notable changes were a reduction in the allocation to both Japan and US equities, and an increase in the ­allocation to Emerging Markets.”

“The equity part of the portfolio stands at around 47 per cent, but the risk profile has been somewhat reduced, and the pure money market part of the portfolio now stands at its peak of 20 per cent. Two positions have been trimmed: one on a bottom-up basis – CAAM Dynarbitrage International. The current volatility of the fund is not compatible with a 5 per cent holding in a ­balanced portfolio. The other is ML Focused Value, but rather because of an asset allocation inflection toward a more conservative, bigger caps stance. The ­portfolio remains concentrated on 14 holdings.”

“The consequences of the subprime crisis lend fuel to volatility. We are ­cautious given the current market conditions, although we don’t believe the market is turning bearish. We have made some changes in fund selection: we have split our alternative strategy between two multistrategy ­products – L Multi Hedge and L Dyna Hedge. While this won’t have a ­significant effect on portfolio volatility, it increases expected return. It also reduces specific or ­diversifiable risk in the underlying funds. We also have increased our investments in US Select Growth, which has the potential to deliver even higher returns.”

“Equities have continued to be volatile amid concerns about bad debts arising from the US housing market. Worries stemming from the credit markets, which had led to a virtual seizing up in overnight lending ­markets, have abated, but credit is harder to come by and more expensive. The eventual cost of bad debts for the ­financial sector remains unclear and the valuation of some complex debt securitisation instruments also remains opaque. So, sentiment remains fragile in the Western ­markets while in Emerging/Asian regions, markets and underlying funds have been buoyant on the basis that they might be more resilient to a US slowdown.”

“The decision by the US Federal Reserve to cut interest rates at the end of October had an impact on Asian markets, boosting short-term ­sentiment. Share prices consequently rallied, with China – which is heavily weighted within our fund pick Templeton Asian Growth – showing the strongest performance of the local markets. The ongoing problem in the subprime lending segment in the US has shifted into investors’ focus, ­resulting in lower stock markets. Hence, issues such as falling profit margins or rising inflation tend to heighten our concern about market prospects.”

“Markets generally did well in October and our selections in the racier Asian and Emerging Markets from Veritas and Nevsky did well with top-quartile returns of over 9 per cent each. Overall, our portfolio remains ­cautious in its fund selections, but this need not hold returns back, with good returns from the ­conservatively positioned Cazenove European, Rensburg UK Managers’ Focus and Findlay Park American Smaller Companies funds. Bonds recovered too, and good peer group returns were seen from both Thames River High Income and Thames River Global Bond during October.”

Each month in PWM, 12 top European asset allocators reveal how they would spend E100,000 in a fund supermarket for a fairly conservative client with a balanced strategy

When case study Clariden Leu decided to integrate its processes and ­outsource IT, it understood the magnitude of the task. Peter Guest reports

Clariden Leu’s COO, Roland Hermann, is likely to be managing change for some time as his IT integration has taken place in front of a backdrop of ­shifting management and structure, as senior figures within the bank depart and the newly merged entity continues to grow through acquisition.