I blame the fund managers
I’ve been building up a couple of dummy funds on Reuters’ new Portfolio tool. Not only is it a welcome diversion from actual work, but it allows me to test the mettle of the fund managers we speak to, and check out the guidance offered by the Lipper Leader fund rankings.
One of my portfolios uses the stock picks and short ideas offered up by the managers we interview for the many FUND VIEW stories which dot the Reuters wire. The other simply picks some of the funds which score highest across the Lipper fund sectors.
In theory, it gives me ample room to lay blame elsewhere when the dummy funds inevitably go belly up and I’m forced into a fire sale of assets to repay my dummy investors with dummy money. In truth though, I’m going to set the asset weightings and decide when to buy and sell so any abject failures will be more fairly laid at my door.
The early results, in fact, are pretty encouraging.
The Fund Viewer stock picking portfolio has delivered me a comforting 8 percent return since I put it up on Sept 25 (my wedding anniversary — must be a good omen) and that’s with a ridiculously cautious 36-percent weighting in cash, as well as some equally ridiculous single-stock exposures caused by misreading the denominations. (That little ‘p’ is pence folks, big ‘P’ is pounds)
My Fund Leaders fund of funds has even less of a track record, but has still managed close to 2 percent returns since Oct 6.
Both funds are outperforming the FTSE Europtop 100 index, my chosen benchmark, by more than 18 percent on a three-month view. I’ve not exactly been scientific about choosing the index, but fortunately my dummy investors have notoriously poor due diligence standards.
from Summit Notebook:
Time private bankers got professional
It's hard to imagine that a banker who represents multimillionaires would be anything but professional - but a top executive at a leading global bank thinks that's precisely the wealth management industry's problem.
"There is so much mediocrity in the industry we have to raise the bar here," said Gerard Aquilina, vice chairman of Barclays Wealth, at the Reuters Global Wealth Management Summit in Geneva.
To Aquilina's way of thinking, private bankers need the same "institutional rigor" as investment bankers in the way they operate. To this end the bank is looking to pursue only top-quality hires.
"Our strategy is not to be the hoover that comes and hires willy-nilly, we want to be much more selective," said Aquilina -- perhaps an ironic view given Barclays acquired thousands of investment bankers from the ashes of the fallen Lehman Brothers last year.
But he and his colleagues are so sure of their position that he said they are working on developing MBA-level courses with some unnamed top universities on private banking, especially as they see fewer and fewer interns turning up their noses at the prospect of a three-month rotation in the private banking shop.
from Summit Notebook:
Tax evaders on the run
By Neil Chatterjee The U.S. has promised it will hunt down tax evaders. And it seems tax evaders are on the run. DBS bank, based in the growing offshore financial centre of Singapore, told Reuters it had been approached by U.S. citizens asking for its private banking services. But when told they would have to sign U.S. tax declaration forms, the potential clients disappeared. Swiss banks also approached DBS on the hope they could offload troublesome U.S. clients to a location that so far has not been reached by the strong arms of Washington or Brussels. DBS said no thanks. In fact many private banks and boutique advisors now seem to be avoiding U.S. clients. Will this spread to other nationalities, as governments invest in tax spies and tax havens invest in white paint? Is this the end of offshore private private banking?
from Summit Notebook:
Private bankers chanting new mantra
Private bankers still getting their ears bashed from clients enraged about massive portfolio losses now are chanting a new mantra.
Murmur along with me, those seeking inner peace and appeased clients: the word is “holistic".
Three years ago, before Lehman and Madoff shattered clients’ confidence, the soothing formula might have been "absolute returns" or "structured products". No longer.
Bankers shooting French cuffs in Super 180 suits and obsessed with spread sheets now are seizing on a word redolent of green tea, acupuncture, crystals and the New Age.
"Holistic" bubbled up at least four times at the Reuters Global Wealth Management Summit as bankers and consultants in Singapore and Geneva outlined how to keep clients after the market meltdown.
But what does a word meaning that whole entities have an existence other than the sum of their parts have to do with rich people and the gnomes that mind their money?
"Holistic" in bank-speak translates as handholding, face time and hustling to assure wary clients bankers are on the job. Mass mailings are out, daily phone calls are in.
from Summit Notebook:
Private banking: you may be worth it
Those who tend to avoid posh restaurants in Geneva’s expensive Rue du Rhone district and famed private banks because they believe they are not rich enough may be given a second chance at century-old wealth manager Julius Baer.
The Swiss private bank, which has made its name thanks to the services it offers to the ultra-rich, believe its powerful high-end brand may be keeping potential clients away.
“It’s a bit like the nice chic restaurant on Rue du Rhone you walk by 10 times and think: “I am not so sure I can go in there, it might be a bit sophisticated,” Boris Collardi, Chief Executive of Bank Julius Baer, told the Reuters Wealth Management Summit in Geneva.
“And then you end up going in there and you have a wonderful meal.”
Private banking services at Julius Baer start at around 1 million Swiss francs.
Worth trying?
Market pressure will build diamonds
”It’s not just because we had a year of correction that the next year will be positive,” said Ariel Sergio Goekmen, an economist and a director at Credit Suisse’s head office who looks after wealthy families’ investments. “The recession could be deeper than one expects. We have not yet seen the darkest side of the night.”
(Reuters photo: Sukree Sukplan)
There’s a lot of cherries to be picked in real estate as well, look at Dubai real estate where prices have come down as much as 45%. Like good stocks investing in Dubai property or real estate in general can have great growth potential.
One Minute Manager
One minute, one manager. An occasional word about what to expect from the economy and financial markets. Today is Giles Keating, global head of research at Credit Suisse Private Bank.
It is time, Keating says, to prepare for a bottoming out of the global economic downturn.
For better or worse?
Wealth managers at Citi Private Bank are telling their clients to stay neutral in their exposure to hedge funds at the moment, whether the strategy be event driven, equity long/short or macro. The main reason is that capital markets are still stressed and many hedge funds still need to deleverage.
The firm points out, however, that hedge funds had a good news-bad news kind of year in 2008. Based on the HFRX Global Hedge Fund Index, it was the worst performance on record. The index lost 23.3 percent. Its next worst performance was 2002 — and that was only a 1.5 percent decline.
Losses were widespread across all kinds of strategies. Only merger arbitrage and systematic macro gained anything.
The good news, so to speak, was that that this dreadful performance was better than what you would have got from just plain equities. The S&P 500, for example, lost 38.5 percent, meaning that the hedge fund index outperformed by a whopping 15.2 percentage points.
It was that kind of year.
Going back to Quakers?
In these troubled times, go back to basics.
Theo Zemek, AXA Investment Managers‘ global head of fixed income, says investors should adopt “Quaker investment policies” – sober and safe investment strategies that can be explained to their grandmothers.
“Anyone who utters the word ‘hedge’, after all these CDS (failures), ought to be taken out and be shot,” the 25-year markets veteran told a media briefing.
“This is the scariest market I’ve ever seen in 25 years. The world of complex instruments, credit guarantees… That world is very much an ancient history… It’s a darn tough market. Who is left standing among our counterparties?”
Zemek said she overheard commuters on the train discussing the new preference for simplicity in investment strategy and citing Goldman Sach’s chief global economist Jim O’Neill as saying: “Anyone who thinks they understand what’s going on is guaranteed to be an idiot.”
AXA IM’s parent company AXA said last week that it has a non-material equity interest and credit exposure in Lehman Brothers (collapsed) and AIG (bailed out).
UBS: no longer in one piece?
It is now official — Swiss bank UBS has ditched its much-cherished “One Bank” strategy.
The bank said it would split its business in three autonomous units, after taking yet another credit hit and posting a worse-than-expected second-quarter loss.
The news will spark further talk the bank may hive off business units such as its embattled investment bank. UBS in a conference call would not rule out divestments further down the line, though it said it was not now working on such plans.
The bank is already Europe’s biggest victim of the credit crisis. Today, it took another $5.1 billion hit on credit positions, bringing the total to $41 billion. More importantly, it saw hefty outflows out of its wealth management business for rich clients.
The news comes just days after it was forced to buy back billions of dollars worth of auction-rate securities to compensate for client losses in the United States.
In reply, it is now saying it is “repositioning” itself. It is splitting up its business in three separate units. It is calling its wealth management unit — for rich clients — its “core asset”. It says it will continue to invest in wealth management, but does not put equal stress on its investment bank.
These may be small steps, but markets liked the news. UBS shares were more than three percent up in early trading.
