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Worlds Super-Rich Focus on Safe Investments

Date: Tuesday, October 14, 2008
Author: Sudip Kar-Gupta, Reuters.com

 GENEVA/SINGAPORE (Reuters)—The credit crunch has scared even the world's richest people into sticking their assets in safe havens.

Private bankers and asset managers at the Reuters Wealth Management Summit said gold, cash and government bonds were in fashion—at the expense of the modern art, private planes and yachts which were more in vogue during the boom years.

"Right now, you are seeing a very strong focus on real assets, financial investments," said Boris Collardi, chief operating officer at Bank Julius Baer. "You'll probably find right now that clients who have ordered a luxury car may reconsider that order."

Christophe Bernard, managing director at family-owned Swiss private bank Union Bancaire Privee, also evoked the defensive investment approach of clients. "Unless you are in cash, gold or govvies (government bonds), you will lose money. You need to be ultradefensive."

The cautious investment approach was also echoed at the Singapore leg of the Reuters Wealth Management Summit.

Jennifer Tay, Asia-Pacific head of portfolio counseling for Citi Private Bank, said fears that high-growth emerging markets would also be hit by the financial crisis had caused customers to spend their money carefully Previous Reuters Story. "Now they are pursuing preservation of capital rather than pursuit of yield, which is a very different stance from a year ago," she said.

Speakers at the summit said government bonds from the world's top rated countries were popular, such as Treasuries.

Regarding cash, they said what was important was to diversify and not be too heavily exposed to any particular currency.

"Where the dollar will go against the euro, I don't have a clue. From a trading point of view, it is so difficult, our advice is diversify and try to be as close to the goals as we set on your wealth," said Bernard Coucke, European head of private banking at ING.

Too Early to Return to Equities?

Speakers also said it was too early to return headlong into the equity market, despite a major slump in global stock markets over the last month due to a series of high-profile banking failures, such as the collapse of Lehman Brothers.

"Even if the market looks appealing, the timing is a bit too early," said Union Bancaire Privee's Mr. Bernard.

Dario Prunotto, chief executive officer of UniCredit Private Banking, also said his division was underweight on equities—a view echoed by Julius Baer's Mr. Collardi. "We wouldn't advise people to be overweight on equities."

Peter Flavel, the global head of private banking at Standard Chartered, added that the burgeoning class of Asia's super-rich was more concerned with spending money on their own businesses. "A lot of those people are thinking about what to invest in their business. Those who are cashed up are looking to expand their business."

British artist Damien Hirst may have recently sold work for record prices despite the credit crunch, but UniCredit's Mr. Prunotto said demand for artwork was for the time being a superficial fad compared with more pressing financial concerns. "In general terms the clients declare that they are more interested in art and alternative investments, but in reality they continue to invest in financial assets."

By Sudip Kar-Gupta