The rebranding of the Ras asset management franchise is more than just a cosmetic exercise, reports Elisa Trovato

Standard Chartered’s coup in landing American Express illustrates the bank’s recovery in the private banking stakes. Ted Wilson reports

Distribution of foreign funds is becoming increasingly important in Germany. At PWM’s Frankfurt conference, three fund managers from foreign banks discuss the latest trends for the sector. Ruth Fend reports

Germany’s investment industry faces challenges from legal changes. Supervisory aurthority Bafin’s Horst Nottmeier updates delegates on the progress of amendments to the law

Investors’ interest in alternative investments has been heightened by the ­subprime crisis. Dietmar Bahr of BAI tells the conference why

Funds and private banking boss at SocGen, Philippe Collas, has thrived as an early player in Asia. While he expects good growth in Eastern Europe, it is the French market which can cause the biggest problems, writes Yuri Bender

Fund managers implementing the latest version of the European investment guidelines are finding their options opening up, writes Elisa Trovato

From exotic to the norm

The march of derivative usage from niche strategies into mainstream asset management now seems inexorable. With the convergence between the absolute return focused hedge fund community and the mainstream asset management market, this increase in derivative use is mirrored by a growing sophistication in the markets that they serve.

Hedge funds proved they were not immune to this summer’s market turmoil. But while some investment chiefs have refocused their strategies, the sector has not lost its allure, as Elisa Trovato reports

The transition to a more sustainable energy future and the mitigation of climate change are the greatest challenges facing humanity in the 21st century. Energy transition is thus set to play a central role in investment decisions of the future, write Pictet’s Denis Schmidli and Christoph Butz

Portfolio managers must ensure that they are fully aware of the exposures they have at any given time and the ability of the portfolio to react independently in the eye of a storm, writes John Godden

Widening bond spreads mean that finding value in the high yield bond market has become more of a challenge, writes Simon Hildrey

Martin Steward speaks to fund selectors and hedge fund managers about how they can best shape their investments to reduce volatility and improve returns following the financial crises of summer 2007

Nat Mankelow assesses whether ‘hidden’ assets such as volatility could provide a source of spice for risk-neutral structured product investors

“The JPM Highbridge quantitative ­strategy has been downgraded and consequently the portfolio weight has been reduced. Two aspects underlie this decision. First, the strategy proved to be too much correlated with other quant strategies, then subject to crowded trades problems. Although Highbridge declares to have done improvements in this sense after the August crisis, the correlation with quant funds, including hedge funds, is still considered a negative. Second, the fund in August exhibits an unexpected level of volatility; therefore its weight into the portfolios has been reconsidered according to this higher level of risk.”

“Overall we carried out three major changes to our portfolio allocation from September. We reacted to the weakening of the yen in comparison with the euro and replaced Vitruvius Japanese Equity JPY with the hedged share class of VCH Japanese Opportunities. Furthermore, we consider Threadneedle American Select Fund to be a sustainable long-term investment in the US and therefore preferred this fund to SGAM US Relative Value. Finally, we substituted MPC Competence Europa Methodik AMI with JPMorgan Europe Strategic Growth, because we believe that the European growth story can continue.”

“A positive shift in market sentiment appeared in September after the surprise 50 basis points cut by the Federal Reserve improving the chances of a recession free economic soft landing. History suggest that the 12 months ­following the first Fed easing has tended to deliver significant equity out performance, provided the US economy does not move into recession. We have increased our equity position to emerging markets, an area that will benefit from continued US growth. We continue to favour the JPM Emerging Markets Alpha Plus fund due to its total return and flexible structure.”

“We have kept the allocation to traditional European bonds at an absolute minimum (15 per cent) as we do not find any value there. Instead we have included ING Senior Bank loans, an asset class that has suffered some beating lately despite its very low default rates in general. Another interesting asset class is rouble-denominated corporate bonds. In the equity allocation we have included funds investing in the new European countries and Asia. Chinese equities are currently experiencing a price bubble, but as the market’s liquidity remains plentiful, we think the bubble will inflate further before bursting.”

“This month we did not modify the asset allocation of our portfolio between equity and bond funds but we made two changes in the equity side. We introduced MFS European Equity Fund and Vontobel Global Value ex US Fund and redeemed MFS European Value Fund and Vontobel Global Value Fund. We are still monitoring the market, looking for new funds that could be included in our portfolio. Each potential change in the portfolio will derive solely from fund picking.”

“Over the past month, our balanced portfolio benefited from its credit and equity exposure. Corporate and emerging spreads recovered strongly over the past few weeks, in an environment of decreasing risk aversion. Our investment in South East Asia, via Fidelity, contributed to performance. We took profits after strong growth in our gold and commodities positions, selling the AXA Or et Matières Premières Fund, which represented 6 per cent of the portfolio.”

“We increased equities to 50 per cent, reduced alternatives to 40 per cent and left fixed income at 10 per cent. We made several manager changes. We sold our position in the JPM Highbridge Statistical Arbitrage Fund. This strategy did not do as well as expected in August and following a recovery, we decided to exit. We sold our position in the Aberdeen Asia Pacific fund and increased our holdings in the First State Asia Leaders fund, which we believe is better positioned to deliver returns. Performance from Aberdeen has disappointed and we believe this to be a combination of portfolio positioning as well as the significant asset growth of the business.”

“The overall balance of the portfolio has not changed much over the month. A new holding was added on the US equity side totalling 15 per cent of the portfolio over four funds: Kinetics, Merrill Lynch, PIM and Skandia. The extra holding is managed by Epoch Investment Partners. New Star European Growth was sold. Its sector positioning does not fit in where we intend to position our portfolio at present. We intend to seize any pullback on emerging markets to add up to this small holding, which accounts for 2.5 per cent of the portfolio. But the pace of the recent performance has prevented us from adding to it now.”

“Few changes in our portfolio since our last review. Although an intermediate global uptrend is indicated in equity markets and doesn’t call for a bearish view, some care should be taken as the rebound doesn’t appear very solid. Looking to asset-backed commercial papers yields, it is clear that credit conditions are normalising but still not back to their pre-crisis levels. Next FOMC [Federal Open Market Committee] meeting conclusions (on 31/10) will be primarily dependent on the conditions of the credit markets. The prospect of another ease at the end of the month is therefore dimming.”

“Equity markets have emerged steadier than expected from the summer sell-off. With central banks now emphasising their willingness to help markets, the emphasis has shifted from forecasts of higher rates to worries that it is too late for rate cuts to prevent an uncomfortable slowdown. Set against these fears is the relatively firm pace of growth before the recent disruption, particularly outside the US. Furthermore, the economic impact of market crises has often been less than feared at the time. Accordingly, if central banks are successful in restoring normal liquidity conditions, any setback to growth could prove modest, allowing equities to extend recent tentative recovery.”

“Within Sal Oppenheim’s Fonds Office we evaluate two aspects of performance: return and risk (as defined by the standard deviation of returns and tracking error versus the benchmark). It is important to remember that most managers experience out- and under-performance over a market cycle. While relative performance is therefore unstable over time, the types and level of risk assumed by a manager in his search for ‘alpha’ is generally much more stable. In other words, managers who are much more aggressive than the benchmark tend to maintain that level of aggressiveness over time.”

“The portfolio blends a wide range of specialist equity managers, offering niche investment approaches and high alignment of interest with their investors, with three uncorrelated fixed income funds that could all benefit in different ways from the outcome of the credit crunch. We have added the absolute return Blackrock Absolute Alpha to add further stability. The equity managers have all been chosen for their ability either to be very flexible in how they deal with changing market conditions, or at the other extreme ignoring market noise completely – in any event momentum managers do not feature at present.”

Each month in PWM, 12 top European asset allocators reveal how they would spend E100,000 in a fund supermarket for a fairly conservative client with a balanced strategy

American Express Bank needed a parent that could accommodate its private banking and transaction banking services – enter Standard Chartered. Peter Guest assesses the £1.6bn deal

Rather than being limited by the Markets in Financial Instruments Directive, Denmark’s Saxo Bank is feeling positive as it can now offer previously restricted products throughout the EU. Peter Guest reports

SGSS’s acquisitions across the continent offers clients a local presence but backed up by a global brand, writes Peter Guest