Swiss, Austrian Wealth Clients Shun Risk as 22% Expect Euro Ruin

Private-banking clients in Switzerland and Austria are holding wealth in less risky assets as confidence in the financial system and the ability of advisers to secure investment returns remains low, according to a study by LGT Group and Johannes Kepler University.

“The majority of private-banking clients remain risk- averse,” Vaduz, Liechtenstein-based bank LGT Group and Linz, Austria-based Kepler University said in a joint report. “The high level of risk awareness and loss of confidence are reflected in the high cash share of portfolios.”

The average cash proportion of investments in Austria doubled to 44 percent, compared with two years ago, after wealthy individuals sold commodities and other riskier assets, the study said. It was little changed at 27 percent in Switzerland, according to the survey of 258 investors across the two Alpine countries. The share of alternative investments, including hedge funds, remains “very moderate,” it said.

In Switzerland, 77 percent of investors described themselves as “risk averse” or “risk neutral,” compared with 78 percent in Austria. More than half of those surveyed said confidence in the financial system had been “severely dented,” while 22 percent expect the euro region to “collapse,” a scenario that prompted Austrians in particular to ditch their home-currency holdings in favor of Swiss francs.

‘Bad Luck’

Respondents said general market trends as well as “good or bad luck” played a more important role than advisory services from their bank or the quality of the firm’s products in determining returns. The most common objective for this year among respondents is inflation-adjusted capital growth, according to the report.

Swiss investors reported a negative average return of 3.7 percent for 2011, compared with a positive 0.1 percent among interviewees from Austria, the study said. Fifteen percent of Swiss respondents and 16 percent of Austrians were satisfied with the return on investments last year, the report showed.

To contact the reporter on this story: Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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