Rich investors are taking more precautions than ever in their wealth, and instruments once seen as complex and exotic are becoming more commonplace in their portfolios, wealth managers said at the Reuters Private Banking Summit.

Asset classes such as foreign exchange, gold, oil and industrial commodities are beginning to have specific and identifiable hedging roles in portfolios, beyond the broad brush “diversification”.

That is a far cry from three years ago, when investors spread money around asset classes and managers in the vague hope that broad enough diversification would help them make money in all market conditions, or at least preserve wealth.

That notion disappeared during the financial crisis, along with around $12 trillion of market value.

Investors still want exposure to emerging markets, but they fear leveraged investments in volatile equities markets, where they were badly burned during the crash.

But, their hunger for growth unabated, this time investors are plumping for emerging markets bonds.

They are also looking to protect themselves against the vagaries of the economy.

While wealthy clients remain ultra-cautious about real estate, some are being tempted to snap up trophy properties that promise to throw off a healthy amount of cash.

On the fringes of the Reuters Global Private Banking Summit, Banco Santander executives said they had been involved in six to eight large real estate transactions including the sale of a Miami marina in this year.

In another deal, a Mexican client snapped up a chunk of distressed commercial real estate in Spain from a seller seeking to cut leverage. The properties were returning more than 6 percent in cash flows, a healthy spread over the buyer’s 4 percent borrowing costs.

More recently Santander private banking unit Banif assisted a client in the sale of the Valderrama golf course in Spain to Australian golfing legend Greg Norman.

Valderrama was the site of the first ever Ryder Cup to be held outside the United States or the UK in 1997, when Europe’s top golfers defeated their U.S archrivals.

Diversified cash flows were the major attraction of this type of property, said a Banif executive, citing membership fees to the golf club and rentals of the club’s real estate and subscriptions to related services.

 “There is still demand for high level tourism,” he said.

“Gold is not an investment. It doesn’t pay you interest and it doesn’t increase wealth,” complained one investment advisor recently as he perused exploding client demand for the yellow metal.

“It’s just a cautious asset for scared investors,” he grumbled as he waved a chart showing prices had once again hit an all-time high.

Some anecdotal evidence suggests he may have a point.

Bankers at this week’s Reuters Private Banking Summit said investors were loading up on gold to the tune of some 7 to 10 percent of their portfolios.

The traditional motive of hedging against inflation was conspicuous by its absence.

The wealthy were buying gold because they were worried by the possibility of deflation, by a collapsing dollar or by the threat of prolonged financial turmoil.

Many were getting exposure through gold-backed exchange traded funds or gold stocks related stocks.

Fund service providers were back in force at the GAIM hedge funds conference in Monaco this year, a small sign that the industry, while not exactly brimming with confidence, has at least crawled out of the doldrums of 2009.

The service providers including fund auditors, custodians and prime brokers, have drawn in their horns since the early years of the millennium when they were often the main sponsors of cocktails and dinners at large hedge fund events.

They were conspicuous by their near absence at GAIM 2009, as were the free-for-all champagne receptions, gala dinners and so on, as money drained from the industry after hedge funds suffered their worst ever losses in the crisis year of 2008.

One of the big four auditors, for example, brought 22 staff in 2008, but just four in 2009.

But service providers were back in force this year, although they kept a far lower profile than before the crisis. For example, this year they preferred to sponsor low key dinners and talk business with clients real and prospective, rather than lavishing expensive freebies on all and sundry as in years past.

And at the cocktail receptions that were on offer, drinks tended to run out after an hour or two (this was not the fault of the correspondent).

It was a far cry form the fondly-remembered Bear Stearns Monaco beachfront party of 2007, a Lucullan bash worthy of the last days of Pompeii.

It may seem tenuous, but the small number of delegates present in Monaco’s Grimaldi forum on Wednesday at the start of the second day of the GAIM hedge fund conference is a clear indication that the industry is feeling renewed confidence after the gloom of last year.

The reason for the poor morning turnout is quite simple. A good proportion of the attendees didn’t make it to bed until at least 3.30 a.m. on the first full conference day.

Sass, Monaco’s favourite drinking hole was so packed the previous evening that it was impossible to get anywhere near the bar.

The crowd was still thick enough to force the few passers by off the pavement if they didn’t want to get held up by the heaving human traffic jam. A stark contrast to 2009 when access to the bar area was relatively clear and even the hard core drinkers began making their way back to their hotels by 1 a.m.

Some attendees protested it was last night’s unseasonal torrent of rain that kept them hemmed in at the bar, but it didn’t prevent them from hopping into taxis to make their way to Jimmyz, the most famous of the principality’s nightspots.

At Jimmyz back in 2009, the atmosphere and the numbers were more what one might expect in an obscure exhibition at a remote museum or at the funeral of someone with few friends.

This year, the club was buzzing.

 Travelling towards Italy’s major financial centre Milan last Sunday on my way back to Zurich, I spotted something out of the window that had little effect on my fellow train passengers but made my blood run cold.

 The massive storage depot just outside the city was practically devoid of goods containers.

    These containers are usually stacked four high in periods of normal economic activity, although their number fell noticeably during the recession from which we have now supposedly emerged.

But now there was bare space on the ground.

This clear indication of economic woe does not only afflict Italy, however. Over the past several years, the majority of the containers passing through the Milan depot have belonged to Hanjin, China Shipping, Hapag Lloyd (China) and other Chinese shippers.

The recession has undoubtedly impacted the sale of Chinese goods in Italy, and probably in other countries served by the Milan depot as well, such as Switzerland, just an hour’s train ride to the north, with a continuing impact on Chinese exports.

The government has stepped in briskly to lend a helping hand.

Nowadays most hedge fund managers who use leveraged trading strategies such as relative value to exploit pricing inefficiencies employ multiple prime brokers.

If you ask them why, they will generally answer that, post Lehman, having multiple prime brokers is seen as a fundamental part of managing counterparty risk.

However, many hedge funds, especially the high-frequency traders who have come under the spotlight recently, already used multiple prime brokers before the collapse of Lehman.

But two years ago, hardly any of them mentioned counter-party risk. It was almost a non-issue, since virtually no one was expecting a major bank to go down the tubes.

At that time, the most common explanation for having multiple prime brokers was that “we don’t want one broker to know all our trades”.

But why? There is by law a Chinese wall, or a series of them, between a bank’s prime brokerage and its proprietary trading desk.

Surely the hedge funds know that? So the question of the bank’s prop desk potentially front running their trades should not arise, should it?

The sleepy town of Lugano, in the Italian-speaking Ticino region of Switzerland, has emerged as a key collection centre for Madoff-related funds.Between $2 billion and $5billion lost in the Madoff fraud was gathered in the town–population 52,000–much of the money coming through the Italian cities of Milan, Turin and Rome, according to private banking and investment management sources who requested anonymity.With losses of that size, one might imagine the Lugano courts are overflowing with investor-led legal actions, but civil and the criminal directors of public prosecutions said last week they are yet to receive any complaints related to the Madoff affair.The above mentioned sources say representatives from some of the largest funds hit by Bernard Madoff’s reported $65 billion fraud regularly did the rounds in Lugano, located very close to Switzerland’s border with Italy.Sales agents acting for Madoff feeder funds including Fairfield Sentry, Kingate and Thema or collecting assets to invest directly in Madoff either had bases in Lugano or were frequent visitors to the town, these sources said.One of them was Yanko della Schiava, one of the five sons-in-law of Walter Noel, boss of Fairfield Greenwich Group whose Fairfield Sentry lost up to $7.5 billion. Sources say della Schiava marketed the fund from bases in Lugano and Madrid.Sonja Kohn, head of Vienna-based Bank Medici which was behind the Herald funds which lost up to $2.1 billion and also distributed the $1.1 billion Thema Fund, also stopped off frequently while travelling between bases in Milan and Zurich.Other frequent visitors include Carlo Grosso and Federico Ceretti, co-founders of London-based FIM Investment Advisors, two of the people behind the Kingate funds which lost up to $3.5 billion, who were indicted in New York along with others associated with Kingate in June.FIM also advised Five Balanced Fund, a fund offered by Lugano-based Bipielle Suisse which invested in Madoff via the Kingate funds, which could have allowed FIM to claim two sets of fees, according to investment management sources who had meetings with the FIM founders.Bipielle Suiss is owned by Milan-based Banco Popolare, which hit the headlines four years ago as Banca Popolare di Lodi. At that time the BPL supremo was Giampiero Fiorani, who eventually ran into legal trouble over BPL’s aborted attempt to buy larger rival Banca Antoniana Popolare Veneta.Fiorani spent six months in a Milan prison in 2006 awaiting trial on a swathe of charges including fraud, conspiracy and money laundering, to which he admitted.The cases are still to be heard, but changes in Italian law under the last Prodi government (with solid support from the Berlusconi-led ”Freedom Alliance”, then in opposition)  mean Mr. Fiorani is unlikely to spend any further time in jail.In May it was announced that the Bipielle (Suisse) subsidiary would be liquidated, and certain assets passed to Banca Aletti, a private bank (also with a Lugano subsidiary) that is wholly-owned by Banco Popolare. Banco Popolare did not respond to an email asking whether the bank had filed a court action regarding its Madoff losses via Five Balanced and Bipielle (Suisse).But who lost money to Madoff through Bipielle (Suisse) and its Five Balanced Fund? No-one has yet said anything to the Lugano courts, and neither Bipielle (Suisse), Banca Aletti or Banca Popolare returned emails or answered questions via telephone.

This year’s GAIM conference was far smaller than the three previous summer events, with fewer organized events, no sponsored gala dinner and restricted cocktail sessions where two or three bar staff struggled to satisfy hundreds of thirsty conference-goers

The fact was duly noted, initially with some concern, by many of the investors and asset managers, several of them grumbling about the limited amount of liquid refreshment available to slake a healthy thirst worked up in the searing Monaco sun.

In the end, however, investors were left impressed by the quality of their numerous meetings with asset managers over the three-day event. Managers too said they were impressed by the incisiveness of investor questions.

Attendance numbers are down at this year’s Global Alternative Investment Management conference in Monaco. Fewer hedge fund salespeople, fewer investors, fewer stands.

It is not really such a surprise, and not only because the attendee list was visibly shorter this year than in 2008. Of the around 800 registered visitors, perhaps 500 have turned up.

On the eve of GAIM last year, when perhaps 900 of the 1200 registered actually made an appearance, the streets of Monte Carlo were filled with hedge fund types drinking cocktails at one of the town’s many chic bars. On Monday, those bars were largely deserted.