Pictet describes best way to use a market downturn

The middle of a downturn or prolonged market turmoil is the worst possible time to consider a rethink of business structure or investment policy, but certain ways are better than others, says Pictet Asset Management.

The top of the market (whichever market you choose) was 2007, and for most managers it has been a battle to contain the slide in sentiment, revenues and profitability since then. But, according to Laurent Ramsey (pictured), Geneva-based group managing director at Pictet Funds, the firm has grown market share in the past five years.

“Our business structure has helped us come through difficult times,” Ramsey says. “The clear reasons are: 1) we are not listed so the share price doesn’t drop, and we can focus entirely on our clients; 2) we have no debt, so we have no refinancing burden; 3) we are dedicated to asset management, so we have been saved the conflicts of interest that came to light through the crisis with other financial institutions. Their problems have served to strengthen our proposition.”

The non-investment context is increasingly important for asset management firms. “We know fund selectors are looking beyond products to the structure, and the ethos of firms, from top to bottom, at due diligence, at operational risk, everything,” Ramsey adds.

Further, a long-term view means the firm does not overpay to rush out ‘me-too’ products. “For example, we started building our capability in emerging debt, which is rather popular now, in 2006. As the crisis grew, demand for money market funds surged, and in 2009, when there was a move to redeploy capital, Pictet had established funds to offer.”

Difficult year for managers

Overall, it has been a very difficult year for managers, and some advisers had been less active than usual. “Private banks and funds of funds have had to decide to increase or decrease risk. If they take the wrong decision, they lose money, and if they take the wrong decision twice, they lose the client,” Ramsey says.

Switzerland, for both wholesale and institutional clients, has been Pictet’s strongest market, but Italy, dominated by retail investors, was also very strong and active. Benelux, after a surge last year, has quietened down, while the Nordic region has been a consistent performer. In Germany, Pictet’s business is balanced between institutional and wholesale clients, while in France, the focus was wholesale business, which produced a very different product appetite.

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