Wed, Mar 1, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

UBP outlook: potential for loss of confidence in govts and fiat money to strengthen appeal of gold and prompt asset managers to hedge diversified portfolios

Tuesday, November 24, 2009
Opalesque Industry Updates - Union Bancaire Privée's outlook for 2010

After the ice age comes the thaw. The climate at the end of 2009 is confirming that the economic recovery is under way, albeit at contrasting speeds in the G7 and the emerging economies: Asia should be sizzling while the Western growth model is set to remain distinctly lukewarm. Overall, financial markets are getting back on their feet and investment opportunities abound. Emerging markets’ equities still seem preferable to bonds but blue chips and defensive names are increasingly appealing. Whilst a depression has been averted, some other extreme risks are being generated by the drastic reflation policies.

World growth is centered in Asia and emerging countries

Patrice Gautry, UBP’s Chief Economist, clearly states that Asia and emerging countries will continue to drive the world economy in 2010. Beyond a growth rebound, what we are seeing is a lasting shift in the world economy’s centre of gravity towards those countries, whose growth is firm and well-grounded. As for the Western model (the G7), overshadowed by debt and unemployment which are weighing down on consumption, it is clearly treading water and those countries’ growth potential has been badly damaged.

Moreover, the fresh generation of growth drivers, such as new technologies, is struggling to emerge.

Against this backdrop, disinflation still prevails everywhere, even though inflation may flare up here and there. Budget deficits will stay substantial in 2010, especially in developed countries.

“Rising debt is structural in the G7 whereas in emerging countries brisk growth will help reduce it fast”, says Mr Gautry.

The G7’s central banks will have to maintain their accommodating monetary policies whilst remaining careful to avoid any bubbles forming on some assets through too much easing. To sum up, moderate growth should follow from the 2009 recession, but many global imbalances will linger.

Investment strategy: keep risky assets rotating

UBP’s investment strategy is based on the current main economic trends and reflects budgetary and monetary policies. Christophe Bernard, the Chief Investment Officer in charge of strategy, recommends an overweighting of risky assets as long as monetary policies remain accommodating and as corporate earnings keep exceeding analysts’ expectations. He also favours a strategic overweighting of emerging countries in equity portfolios but with a rotation between markets.

However, as the effects of the stimulus measures fade, he advocates an opportunistic positioning on blue-chip and defensive equities, which offer an attractive alternative to corporate bonds. Christophe Bernard also provides an insightful analysis of tail risks (the risk of extreme events) that are threatening financial markets and economies, pointing out that the potential for a loss of confidence in governments and fiat money is strengthening the appeal of gold and should prompt asset managers to hedge their diversified portfolios.

The alternative asset management industry, as it rises from its ashes, is becoming proactive again and generating positive performances. Christophe Bernard believes we should “expect hedge funds to outperform bonds and potentially equities as the environment turns favourable to alpha generation and as available credit and equity risk-premiums shrink.” He therefore advises aiming for liquid, and especially long/short and credit strategies. Furthermore, event-driven strategies should bounce back sharply in 2010, under the impetus of a wave of mergers and acquisitions.

www.ubpbank.com


Be

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Institutional investors plan to raise allocations to alternative assets in 2017[more]

    Komfie Manalo, Opalesque Asia: A survey by Context Summits Miami showed that nearly 72% of institutional investors and family offices plan to raise their allocations to alternative asset managers this year, suggesting continued strong demand for the industry. "As many large, brand name f

  2. Comment - Mortgages, mergers and hedge fund fees, Fairholme's Berkowitz responds to court ruling against hedge fund suits of Fannie Mae[more]

    Mortgages, mergers and hedge fund fees From Bloomberg.com: Yesterday the U.S. Court of Appeals for the D.C. Circuit handed down an odd decision in a lawsuit over the government's nationalization of Fannie Mae and Freddie Mac. The key issue is what's called the "Third Amendment," the 2012

  3. Investing - Hedge funds continue to chase the herd in record Momentum wager, Marshall Wace bets grocer Sainsbury may need rights offering, Hedge fund net exposure has started to retreat, David Tepper's Appaloosa fund makes a huge buy, The 10,000-mile journey to Short Australia, Skeptical hedge fund investors grill Evan Spiegel about Snap's I.P.O.[more]

    Hedge funds continue to chase the herd in record Momentum wager From Bloomberg.com: Hedge funds can't get enough of momentum - even if it means embracing an investing strategy they hate. Loosely defined as betting on shares that went up the fastest over the preceding nine-to-12 months, h

  4. Opalesque Exclusive: Swiss investors take fund seeding and acceleration into their own hands[more]

    Benedicte Gravrand, Opalesque Geneva: Banque Bonhote, a 200-year old Swiss private bank, last year launched a community of investors - heads of Swiss family and advisory offices and wealth managers - with the aim of co-investing in the kind of managers they wanted to invest in, either by way of s

  5. K2 Advisors : Why We Like Activist Hedge Fund Strategies and Some Thoughts on Alpha[more]

    Matthias Knab, Opalesque: Rob Christian, Senior Managing Director, Head of Research K2 Advisors, Franklin Templeton Solutions, writes on Harvest Exchange: When d