 |
IT IS MID-APRIL 2010 and Euromoney is listening patiently to three executives of a new private banking venture in Europe big up their prospects as the business emerges from the wreckage of one of the banks worst hit by the financial system crisis. The chief investment officer is outlining what sounds like a suspiciously self-serving philosophy of how wealthy clients need regularly to reallocate strategic exposures rather than sit tight on them. "What we learned in 2008 is that, in a financial crisis, financial assets can fundamentally change character," he says. "What look at first like the least risky can turn out to be the most risky. It was the AAA-rated tranches that turned out to be the most toxic."
And how, Euromoney wonders, is he putting this advice to clients now? "Look, people have been talking about the theory of sovereign credit risk in developed market government bonds for a while now and yet, even where currencies have weakened, such as sterling, yields are still very low. We’re advising clients to move from a normal allocation to governments bonds to a highly defensive one.
