Sept. 4 (Bloomberg) -- Bank of America Merrill Lynch is attracting the assets of rich Australians at the fastest pace in 18 months as markets recover from the global financial crisis.

The bank’s high-net-worth clients, typically worth at least $5 million, are turning to bonds and equities after hoarding cash last year, said Chris Selby, Bank of America Merrill Lynch’s head of wealth management for Australia and New Zealand.

Markets have bounced back this year from the biggest economic crisis since the Great Depression, recording the largest U.S. stock rally since the 1930s. Selby, whose unit has about 400 customers in the region, says there’s still time to profit from the rebound by buying corporate bonds and stocks.

“If growth is out there, you’ll do better in a slighter higher-risk security than in cash,” Selby, 48, said in an interview yesterday in Sydney. “The way to do it is in a controlled way, probably more in fixed income.”

Total assets managed by Australian pension funds, unit trusts, life insurers and managed funds rose 4 percent to A$1.21 trillion ($1 trillion) in the second quarter from the previous three months, the Australian Bureau of Statistics said last week.

After interest-rate cuts worldwide, investors in Australia should trim cash, buy bonds of domestic and overseas companies, and “best of breed” shares in industries such as resources and financial services, Selby, who joined Merrill Lynch in New York in 1985, said. He declined to name specific stocks.

Top Performers

In Australia, the S&P/ASX 200 Index has climbed 19 percent this year after a 41 percent slump in 2008. Mining company Extract Resources Ltd. has surged more than sevenfold and is the top performer since January. Macquarie Group Ltd., up 70 percent, has led gains among domestic banks.

Bank of America Merrill Lynch’s Australian clients typically invest more than half their assets locally, said Selby. He declined to disclose the value of their funds.

Australia’s central bank has cut interest rates to the lowest in half a century to help prevent the economy slipping into recession. Gross domestic product unexpectedly accelerated in the second quarter at the fastest pace in more than a year, putting pressure on Governor Glenn Stevens to raise rates.

Interest rates worldwide are likely to swing back towards pre-crisis levels in the next two to three years as economic growth returns, pushing up returns on bank deposits, according to Selby. Still, corporate bonds may be a better bet.

‘Shorter Maturity’

Corporate bonds might include debt sold by U.S. and European companies, Selby said. Returns on five-, seven- or 10- year securities don’t differ enough to justify buying bonds maturing over longer periods, he said.

“Generally speaking, our clients are favoring a shorter maturity -- one to five years,” he added.

Selby’s division is part of Bank of America’s wealth management business overseeing about $1.6 trillion of assets and led by former Citigroup Inc. executive Sallie Krawcheck. Advisors usually earn a fee equivalent to 1 percent of a customer’s funds, Selby said.

Bank of America Corp. Chief Executive Officer Kenneth Lewis has rebuilt Merrill’s management since the Jan. 1 purchase of the New York-based firm, replacing more than three dozen senior executives and investment bankers.

Krawcheck, named last month to lead the division, said in an Aug. 7 video message to 15,000 financial advisers that she doesn’t like hearing that the merger “means the end of the Merrill Lynch culture.” She said she would spend her first 60 days meeting with employees and reviewing business plans.

Selby said demands on his time have increased under the new owners, who want to know “granular detail.”

“I have to spend a lot more time explaining detail and processes,” said Selby. “And that’s probably not a bad thing. They should know every facet of our business.”

To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net

Last Updated: September 3, 2009 23:14 EDT