A large swathe of the affluent investor market is being overlooked and under-serviced by banks, according to Richard Thornton, executive consultant at Capgemini.

Private banking is back in better health. After several years in the sick-bay following the excesses of the late 1990s, 2004 looks like the year the industry returned to its feet.

In US dollar terms, there was a 13.1 per cent increase in assets under management during 2004 for the 52 banks that provided comparable data for the Scorpio Partnership private banking Benchmark study.

While this latest aggregate figure marks a slowdown from the increase posted at year-end 2003, the asset growth in 2003 and 2004 has translated into a phenomenal 30.4 per cent increase in profits for the Benchmark sample group in US dollar terms.

The key winner in terms of improving its asset base was a mid-sized player, Italy’s Unicredit Private Banking, which saw a 34.3 per cent rise. First among the top 10 institutions was ABN Amro, which posted a 22.5 per cent improvement. But UBS, which ranked first overall, came in at number eight in the percentage change comparison with a 16.19 per cent improvement in its assets under management.

It was the smaller institutions that achieved the best growth in managed assets during 2004, followed by the larger players. The rate of growth for wealth managers with less than $20bn under management was double that for those with $500bn or more. The upper-mid-sized players – with $100bn to $500bn under management – experienced the slowest relative growth rate.

Net new money is the oxygen of the private banking industry. While growth of assets under management is mainly driven by improvements in equity markets, this tells only part of the story about the success of a bank’s growth strategy. These gains can just as easily disappear if markets turn down. Net new money is a much keener determinant as it measures the attractiveness of a wealth manager to winning business from clients and prospects.

Domestic and foreign fund managers active in Italy, and their clients and distribution partners, are experiencing huge changes to their product design and distribution environment.

The Italian wealth management industry is embracing a new set of opportunities thanks to the latest innovation for the investment world to come out of Brussels - the Ucits III directive.

San Paolo Bank, the Italian financial heavyweight, is planning to enhance its product line-up for wealthy and retail clients in order to offer them a wider and more flexible choice. Plans include new fund launches and potentially increasing sales of third-party products.

If anyone is in a good position to sell the idea of traditional fund

products to the French retail investor, it is the popular head of Natexis Asset Square, Philippe Couvrecelle. He reveals his plans to Yuri Bender

Investment funds’ total expense ratios (TERs) have so far been opaque – which has suited the giants as their TERs are the biggest. But, with the European Union’s ruling that investors should be told exactly how much they are paying for funds, this looks set to change. Roxanne McMeeken reports

While the recent move into a core/satellite approach by the French government may have sparked somewhat of a resurgence of interest in the area, the main reason is the wide adaptation of exchange traded funds. ETFs make asset allocation switches cheap and easy to make with a direct impact on risk management

Investment managers commonly identify and discuss risk in terms of the deviation from a given index.

But there is a different reality for clients who are actually putting their savings into investment products

Back offices are feeling the strain from the industry-wide move to open architecture. Representatives from the fund manager, distributor and securities services communities discuss how they are adapting to the new landscape

April’s losses through CDOs by hedge funds and investment banks following downgrades by Ford and GM could reach $1bn. Simon Hildrey reports

Crédit Agricole – Alternative Investment Products Group, CA-AIPG, is a wholly owned subsidiary of Credit Agricole Asset Management and fully dedicated to alternative fund of fund business.

“We have made changes to our balanced portfolio this month in both the fixed income side and equities.

“First, we came back to the convertible bonds area using a cautious fund, focused on both equity delta and a real bond floor. Second, we no longer invest in the large money market holding we used to earlier in the year. Finally, we have initiated a US equity holding – an area we had been out of for months – via a fund focused on high yielding stocks.”

“May saw markets rise with the leaders of the rally initially favouring broad-based large cap stocks before a returned appetite for risk later in the month. The best returns in euros came from technology stocks and higher beta markets such as Latin America. Bonds made progress but were left behind by equities. We are trimming our Asian weighting, and adding to the US and UK on the basis of valuations and improving technicals.”

David Bulteel, head of international portfolio management,

“Bond yields continued to plummet while most equity markets rallied well. Financial markets remain prone to mood swings, from inflation scares to growth scares, with occasional worries about stagflation. A similar pattern occurred in 2004, leading to good equity gains as companies beat profit and dividend forecasts. This will be harder in 2005, with rising US interest rates and higher oil prices. Long bonds look unattractive; but we remain positive on equities.”

“With the US dollar rallying against the euro we switched from the Pioneer US Mid Cap Value (Euro) into the unhedged Pioneer US Mid Cap Value fund. Furthermore, we replaced the Nordea 1 North American Value fund with the Janus Risk Managed Core fund. The rest of the portfolio remained unchanged as we still see stocks relative to bonds as relatively cheap, so we feel comfortable with a broadly diversified portfolio.”

“We see low equity volatility and reasonable equity valuations, with industry PE sticking within a narrow range. Government bond yields in Europe and the US are low, commodity prices are rising, credit spreads are tight and real estate prices are high. Yields may go even lower. Risk-reward is quite poor and calls for an alternative, which is why we are maintaining a relatively low fixed income exposure. We are ready to accept an opportunity cost in the short run, while chasing long-term higher returns.”

“We continue to reduce our equity exposure to US managers and increase our allocations to Europe, Asia and emerging markets. Within the Japanese equity portfolio we decided to replace Henderson Japanese Equity with Schroders Tokyo. Andrew Rose, head of Schroders’ Japan team of analysts and fund managers, has been with the firm for more than 20 years. The valuation drivers of the Schroders process, combined with its relatively low turnover, make the Tokyo fund a good core holding for a Japan portfolio.”

Each month in PWM, six top European asset allocators reveal how they would spend E100,000 in a fund supermarket for a fairly conservative client with a balanced strategy.

Distributors and manufacturers have described some clear-cut patterns which emerged during 2004 and 2005. Both have talked about a strong investor appetite for structured products, a keen interest in hedge funds and absolute return concepts, a gradual move to liability-led investing, and a growing awareness of risk limitation and capital preservation issues.

Using data gathered from the European Fund Buyer Survey, Bella Caridade-Ferreira and Diana Mackay of FERI Fund Market Information explain the reasons behind the funds industry’s current revitalisation

Yuri Bender talks to Burkhard Varnholt about a gradual move away from capital guaranteed structures

While there are several new-style products, including hedge funds, which have emerged as a key part of private clients’ needs, a careful balance must be maintained. Client advisers need to determine a customer’s risk profile, philosophy and lifestyle choices so that a suitable portfolio can be constructed, according to Hansjoerg Borutta of Investment Solutions, the UBS Wealth Management unit in Zurich responsible for product selection.

Clients need plenty of encouragement to venture into unfamiliar territory, writes Yuri Bender

Roxane McMeeken follows the German bank’s steps towards final acceptance of open architecture

The Santander spin-off is spreading its tentacles from Spain into Italy and the UK, reports Paula Garrido

Emerging market and total return products are becoming fashionable in Italy, writes Elisa Trovato

Roxane McMeeken studies how strategies and products are being designed and adapted to satisfy the current nature of client demand

Less conventional long-only investment products have a big part to play in today’s new-look portfolios