Swiss private banks are focusing on risk management as wealthy clients seek safer investments amid Europe’s debt crisis, according to Patrick Odier, chairman of the Swiss Bankers Association.
“Risk appetite has become core to the private banking service again,” Odier said in an interview on the sidelines of the Invest12 conference in Geneva. “There’s a trend toward security and safety which means the more transparent and less esoteric products are favored, in contrast to those that are the most attractive for a short-term investment return.”
Clients of UBS AG, Switzerland’s largest bank, are “paralyzed” by their fear of losing wealth in volatile financial markets, Sergio Ermotti, the Zurich-based firm’s chief executive officer, said July 31. The renewed focus on risk comes as the erosion of Swiss banking secrecy makes investment returns a key benchmark for wealth managers such as UBS and Credit Suisse Group AG.
Private banking is going through major change that requires “continuing innovation in the field of portfolio management,” said Odier, who is senior managing partner of Lombard Odier & Cie, Geneva’s oldest bank.
Private bankers need to learn to “budget” for the risk clients are willing to take and design absolute return portfolios, he said. That type of portfolio measures gains and losses over a given period rather than comparing their performance with a particular benchmark.