Even the rich aren’t as well-off as they were a year ago but that’s not stopping the wealth management industry from focusing on what the future of private banking will look like after the economic downturn has passed. Click below to view my latest story:

By Petra Spescha

European economists have been nearly unanimous about what Europe’s recovery from the crisis will look like on a chart: L-shaped — a severe slump with a prolonged period of flat or minimal improvements in the economy.

But at the Reuters Central European Investment Summit Ewald Nowotny created a new shape when he tried to clarify a statement he made to an Austrian newspaper earlier this month about the economic turnaround.

“It was not a real L-shape –it was an L which was a bit upward bending,” Nowotny, who is on the European Central Bank’s Governing Council, said.

So it appears Nowotny, an economics professor, takes a less pessimistic view of the recovery than we previously thought. Not quite a rebounding ‘V’ shape or a steady ‘U’-shaped rise but somewhere in-between those shapes and the downbeat ‘L.’

Nowotny said last month there was unlikely to be a ‘W-shaped’ recession if exit strategies are timed well. He talked more about exit strategies, rates and the economic outlook here.

Ewald Nowotny gestures during the Reuters Central European Investment Summit, September 28, 2009. REUTERS/Leonhard Foeger

Reuters Central European Investment Summit, September 28-30, 2009

The former Communist countries of central Europe have been the last to be hit by the global economic crisis, but th e hit they took was among the hardest. Only big neighbour Russia’s deep plunge into recession is rivaling the sharp fall from record economic growth that’s in store this year for the economies between the former Soviet Union and Western Europe.

Global risk aversion and deleveraging exposed the weaknesses that the countries had been able to gloss over during the boom years – which in retrospect appeared to have been, in some countries, a colossal binge bankrolled by cheap foreign credit extended by Western European banks that had to come to an end when funding dried up.

Even the specter of a region-wide meltdown lingered over the countries this winter as investors turned a blind eye on the differences between fundamentally sound countries like Poland, and Ukraine, Hungary or Romania, which could avert the threat of default, social unrest and instability only with aid from the IMF and the European Union.

But since the IMF and the EU moved in and made clear they would let no country fail, a pickup in risk appetite has driven up emerging European assets to the extent that some investors already worry about the next bubble inflating.

Worries remain. Many of the region’s export-geared countries’ recovery will depend on a return of demand for their exports in Western Europe. Unemployment is on the rise. Budget deficits balloon. And the mostly Western-owned banks still face an inevitable rise in bad debt that will continue well into next year and could thwart a fledgling economic pickup.

Key policymakers and corporate leaders will discuss these and related issues at the Reuters Central European Investment Summit on Sept. 28-30 in Vienna and Warsaw. We will be blogging about it here.

Poland’s Prime Minister Donald Tusk gestures as he speaks during a conference at the Warsaw Stock Exchange August 28, 2009. REUTERS/Kacper Pempel

   Russian investment bank Renaissance Capital was a big backer of Moscow’s ambition to become a major emerging-markets financial centre, a bridge between European and Asian capital, a rival to Dubai.

    It not only trumpeted the idea, but was one of the first big local firms to take out offices in a sleek glass skyscraper by the Moscow River, surrounded by foundation pits and towers of naked steel girders that were to become Moscow’s Canary Wharf.

Charles Schwab’s Chief Investment Strategist Liz Ann Sonders believes the rise in oil prices is in part directly related to the improvement in the economy. Sonders says “there’s no reality if the economy is starting to improve to the ten-year staying at 2-percent and oil staying at $32 dollars.” Do you agree? Or, will the rise in prices start raising red flags? Click here to listen to Sonders’ view.

Will the rise in oil prices slow the economic recovery? from Reuters TV on Vimeo.

It’s not just traditional western banks that are hurting — the recession is hitting Islamic finance hard, too.

The industry, which operates according to Islamic law and hence has an in-built conservative investment strategy, is seen as relatively insulated from the financial crisis. But some executives at the Reuters Islamic Banking and Finance Summit are not so sure.

Islamic finance should still be able to combat the crisis better than conventional banks but big problems loom if liquidity remains tight. In fact Sohail Zubairi, head of consultancy Dar Al Sharia, reckons they’re facing up to a crisis scenario that could include forced consolidation and layoffs.

“There is a real threat to the business of Islamic banking,” Zubairi told Reuters reporters at the summit in Dubai. “If the liquidity does not return, we will not be able to continue doing our business.”

Yousif Khalaf, head of Ajman Bank, thinks the situation is so bad that growth and profitability are off the menu for this year.

“What is more important is survival and, to some extent, continuity,” he said. “People want to make sure they survive.”

PHOTO CREDIT: A labourer walks inside Sheikh Zayed mosque in Abu Dhabi April 7, 2009. The mosque, one of the world’s largest, is named after Sheikh Zayed bin Sultan al-Nahayan the founder and first president of the UAE who is also buried there. REUTERS/Ahmed Jadallah

The mood in the asset management industry is "very cautious, very realistic but not pessimistic" after the financial industry's "Chernobyl" of Lehman Brothers collapse, according to Europe's fund industry chief.

Peter De Proft, director general of the European Fund and Asset Management Association (EFAMA) told the Reuters Funds Summit, that the mood was now more optimistic.  At least, certainly more so than  4-5 months ago.

Lehman Brothers, though, was Chernobyl. "Boom, it was the atomic bomb," De Proft said, adding that many in the financial industry, including asset managers, appeared "shell-shocked" at the time.

Now he sees more optimism and backs it up with preliminary EFAMA data showing net inflows into investment funds  in January, reversing the trend of outflows seen in the last quarter of 2008. Not huge, but positive, he says. February, meanwhile, was "presumably positive or break-even."

But De Proft was under no illusion that it will take time for investors to venture back in big time. Then again, if you were a fund manager, what else could you bee but optimistic?

(Reuters photo: Andrew Winning)

Master-fraudster Bernie Madoff is the invisible guest at an annual fund fest in Luxembourg, the European capital for fund administration.

Even though the former Nasdaq chairman is under arrest thousands of miles away from this discreet financial centre nestled between Belgium, France and Germany, his presence was omnipresent. Fund managers just can't stop mentioning him.

 One example: "The hedge fund bubble has popped. The market bubble has popped, and to put a cherry on the top you had the Madoff probe in December," said Ken Kinsley-Quick from hedge fund Thames River Capital.

Other speakers have gone into deep soul-searching, accepting that more transparency and due diligence is needed. But few would openly beat their chest and admit any wrongdoing as they all seemed to agree that if the Securities and Exchange Commission could not catch Madoff's wrong doing over 20 years, no-one could.

"Except for a few whistle blowers no-one had expected anything. I really do not think that custodians did not take their role seriously. But it's not helping the industry," Yves Francis, a partner from Deloitte said.

Even Luxembourg's budget minister, Luc Frieden, got into the act, suggesting that a deal should be made out of court to compensate Madoff investors who had gone through Luxembourg-based investment vehicles.

He clearly wanted Madoff to just go away.

(Reuters photo: Mike Segar)

Another in our series of one-minute managers. This time it is Ken Kinsey-Quick, who heads up multi manager investing at Thames River Capital. He reckons the old days of buying and holding equities over the long term are gone for good. Is he right?