UBP Losing Fondness for Gold Sees Bull Market for StocksGiles Broom
Union Bancaire Privee, the Swiss private bank and asset manager founded by Edgar de Picciotto in 1969, said it’s investing more in developed-country equity markets, which will continue to rally next year.
Companies in Europe are expected to boost earnings and buy back shares as the continent’s economy recovers from the sovereign debt crisis, boosting investor confidence, according to Jean-Sylvain Perrig, who rejoined UBP this month as head of asset allocation and chief investment officer for private banking, after two years working at Banque Privee Edmond de Rothschild SA in Geneva.
“Equities should be the best-performing asset class in the healing process,” Perrig, 48, said in an interview at the bank’s offices on Geneva’s priciest shopping street, Rue du Rhone. “We are in the midst of a great bull market.”
The Stoxx Europe 600 Index has more than doubled since the benchmark dropped to 157.97 in March 2009. The measure exceeded 400 in June 2007 and is at about 320 today. European equities will continue to advance next year along with an improving outlook for the economy and expectations for stable inflation, said Perrig, adding that emerging markets will face slower growth and higher inflation.
UBP, which described gold as “the ultimate protection” against currency devaluation and inflation, and printed images of the Temple of the Golden Pavilion in Kyoto, Japan built in 1397 and the gold-painted Acido Dorado house near Los Angeles in its last annual report in April, is buying stocks after the precious metal slumped about 25 percent this year.
Even with rising ratios of share prices to earnings, UBP expects money to continue flowing into developed-country equity markets from emerging markets and from sales of debt securities.
“Even if a small amount of money comes out of developed bond markets, you will have a bonanza” in equities, he said.
The proportion of stocks in a UBP balanced discretionary mandate portfolio has increased to about 40 percent. Debt accounts for 40 percent, with gold at 5 percent versus more than 14 percent at the end of 2011. Clients who choose a discretionary mandate, which gives the bank responsibility for investment decisions, can also expect about 10 percent to be allocated to hedge-fund managers and 5 percent to cash.
UBP, which boosted total client assets under management to 81.1 billion Swiss francs ($88 billion) from 80 billion francs in the first half of the year, is recovering through acquisitions after assets slumped 55 percent in the four years through 2011. The bank acquired the Swiss unit of ABN Amro Bank NV in that year and integrated the international private banking business of British lender Lloyds Banking Group Plc earlier this year. UBP also bought Nexar Capital Group, an alternative investment manager, in 2012.
UBP’s equity research analysts’ stock recommendations have outperformed the MSCI AC World Index’s total return every year from 2005, according to the bank.
For 2014, UBP is advising clients to own companies that embrace the latest trends in technology, including additive manufacturing, cloud computing and social networks. Mobile payments, e-commerce and robotics businesses are also recommended, Perrig said.
As of last month some clients of UBP’s discretionary mandate service can invest in a basket of 39 companies in those industries, which the bank declined to name for this article. Additive manufacturing, or 3D printing, is used in medical technology, car racing and aerospace industries and “will grow tremendously,” Perrig said. “It’s still in its infancy.”
Social-networking companies include Facebook Inc., LinkedIn Corp. and Twitter Inc. They have the advantage of accumulating new clients quickly and cheaply, said Perrig. With equity markets rallying, investments in gold are no more than an “insurance” policy against systemic economic risks and a means to diversify portfolios from other asset classes, he said.
UBP, once the world’s largest investor in hedge funds, sees event-driven alternative investment strategies prospering next year with more corporate acquisitions and share buybacks. For debt, the bank favors short-term investments in bonds, including high-yield corporate bonds.