Total net sales of foreign funds reached a record figure of e7bn during the course of this year, at the expense of local offerings. Elisa Trovato reports

Ted Wilson looks at the implications associated with the arrival of MiFID for private banks, who are confused about what it will mean in practice

The third annual European Fund Series of events is about to hit Milan. Major players will discuss what can be done to restore Italian providers’ credibility

The financial market in the Czech Republic is starting to take off in a big way. Yuri Bender talks to Martin Gardavsky about OVB Allfinanz, a one-stop shop that is providing Czechs with valuable tools

• Train advisers with a customised programme, including how to advise on a series of appropriate products, depending on a client’s age, financial and professional status and needs.
• Conclude partnerships with a series of big-name, reputable, international and local product providers, able to supply a broad range of diversified products.
• Plan for the long term, both in business and investment.
• Do not risk clients’ assets unnecessarily. The history of the region is a turbulent one, with customers having a poor experience of both unregulated pyramid schemes and some government backed investments.
• Once you have secured a client, keep visiting them regularly, and proposing new financial planning tools for all needs.

Despite the commission-based nature of the OVB network, Mr Gardavsky insists that agents are not influenced by the fees attached to favoured products.

Mergers and acquisitions are becoming a growing trend in the European financial services market, and now could be the right time to go for one of these options as investment firms are enjoying high profitability, writes Elisa Trovato

New sophisticated techniques

While not immediately apparent, the mutual fund industry has been undergoing a quiet transformation as the full impact of the Ucits III regulations are felt. Once the privy of the large institutional investor base and hedge fund industry, sophisticated investment management techniques are now being employed in mutual funds.

Italian investors’ portfolios are increasingly likely to contain significant proportions of cross-border funds. Elisa Trovato looks around the country to discover what the outcomes of this scenario may be

Short-dated, high-grade bonds are a good investment opportunity created by indiscriminate selling across the credit markets. Marco Pirondini, global chief investment officer at Pioneer Investments, explains why investors seeking a low-risk option which can out-perform cash should look in their direction

Perpetual evolution and innovation continues to keep structured equity at the forefront, as one of the most dynamic retail and wholesale market segments of the investment industry

The uncertainty in the subprime market has made for an uncomfortable ride in European equities. But most investors think it can weather the storm. Simon Hildrey reports

The niche for collateralising artworks has barely changed in 25 years. Will a new generation of collectors – and artists – open things up for new kinds of lending? Martin Steward reports

“Our balanced portfolio continues to suffer from its credit and equity exposures. But as economic fundamentals have showed signs of weakening, valuations have begun to improve. Accordingly, we decided to increase our exposure to high yield and emerging debt, as well as emerging and European equities. We believe that current risk aversion creates an excellent opportunity to take on riskier assets, especially those supported by strong fundamentals. Consistent with this, we have reduced our positions in euro-denominated government bonds which benefited from the flight to quality.”

“Last month we sold the risky positions so that now the portfolio’s alignment is defensive with an absolute return bias. After the equity correction in August we expect the market to steady. In addition, we anticipate a better market performance within the last four months of the year. Our allocation to US equities (10 per cent), European equities (20 per cent) and Asian equities (7.5 per cent) remain unchanged. So, too, are our Japanese (5 per cent) and Global (5 per cent) holdings. In the fixed income segment we concentrate on Total Return and Euro Bond funds. The overall fixed income exposure is 32.5 per cent.”

“Action by the ECB to inject liquidity and the Federal Reserve in cutting the discount rate highlights the difficult conditions in markets. This has not been helped by the low volumes during the holiday season. The risk of more causalities and contagion into the wider economy is what overhangs sentiment. Markets have re-priced lower and inevitably this throws up opportunities in some areas. In fixed interest not everything will default and growth amongst the developing economies continues. Action taken in haste can often be wrong; we are comfortable with our positions.”

“This month we didn’t modify our portfolio. The markets suffered a lot in the last period, due to the crisis in the ABS market in US. However, as we didn’t have any ABS related funds in the portfolio, we decided to stick to our current position, waiting for a more stable scenario in the markets before doing any change. We are still monitoring the market, looking for new funds that could be included in our portfolio, especially from smaller and more specialized fund houses. Each potential change in the portfolio will derive solely from fund picking.”

“We made no changes to the asset allocation which is 45 per cent equities, 45 per cent alternatives and 10 per cent fixed income. We used the equity correction to simply rebalance the portfolio to this allocation and we are satisfied that our managers are delivering good returns despite the turbulent markets. If you lend lots of money to people with poor credit histories in a rising interest rate environment, you will generally have some trouble, but the main issue this time is that nobody really knows where those liabilities are. We have no exposure to subprime debt and do not seek to invest in credit focused hedge funds.”

“Our equity weighting now stands below 50 per cent. But the risk has been reduced on the fixed income side as well with a record 17.5 per cent of the total assets held in cash. The risk aversion seems to be running pretty high, and the fixed income market has been virtually closed for months. The current climate comes with a lot of overshooting: valuations used to be priced for perfection but are now beginning to be priced for the worst case scenario. Reasonable prices stand somewhere in between. Markets can be anything but reasonable and cash is king.”

Don’t fight the tape! If the credit crisis was to generalise to every part of the market, we should see it on the tape. So far, the markets turned around in mid-August and stopped going down despite the bad news. The hope of a Fed rescue probably helped. Nevertheless, a market that doesn’t go down on bad news is temporarily sold-out. The current message given by the market behaviour is mixed and confusing with a lack of momentum and market breadth in the rebound, consistent with the lack of visibility on the credit crisis. However, if the markets were to penetrate important levels on the downside (1406 on the S&P;) this would call for a bearish view.”

“August was a very volatile month in the markets, due to the fear that US subprime crisis would affect the world economy. Very few asset classes and investment processes delivered positive returns while a lot of them suffered high capital losses. We remain cautious both on the bond and the equity side. Our bond portfolio is positioned on a high duration fund (AXA 10+) as a hedge on the markets, and is diversified with some total return funds (currency, statistical arbitrage, global allocation). Our equity portfolio, as well, is invested in defensive funds and some growth funds invested in technology less hit by the recent market collapse.”

“Equity markets have emerged steadier than expected from the sell-off in early August, although it is too soon to be confident that the risks emanating from the credit markets have been quantified, let alone their possible negative effects on confidence. If Central Banks are successful in restoring normal liquidity in the lending markets, the risks to growth could prove modest, allowing equities to regain the ground recently lost. Although this seems more likely than current fears would suggest, investors will remain cautious while so much uncertainty remains over where the losses caused by the delinquent loans have come to rest.”

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

MiFID comes into force on November 1 and could mark a revolution in the amount of information wealth managers need to provide, but some see it as a continuation of a current process. Peter Guest reports