Fund selectors discuss financial crisis, gold, farmland and liquidity issues
Europe’s financial crisis and its effects on the region’s banks are discussed by Dirk Wiedmann of Rothschild Wealth Management and Matthias Hopppe of Franklin Templeton, while Farmland Principles are explained by Zurich-based Adveq and its managing director Philippe Bucher.
Name: Dirk Wiedmann
Title: Head of investments
Company: Rothschild Wealth Management
What is your view of Europe’s banks?
Most are still highly leveraged and heavily exposed to weak government bonds. Any debt restructuring in Greece, Ireland, Italy, Portugal or Spain would wipe out the equity capital of the domestic banking system.
Across the continent, banks need to take further steps to repair or strengthen their balance sheets. The looming recession will add to banks’ mountain of bad debt. Recessions typically threatened around 5% of assets on banks’ balance sheets, but few banks are currently strong enough to withstand another wave of losses.
Banks’ own access to funding is also a major concern and the risk of extreme outcomes such as nationalisations cannot be ignored. We recommend avoiding direct sovereign or banking exposure to weak eurozone countries and are very cautious on all unsecured bonds in the European banking sector.
Name: Nalini Bonnier
Company: Catella Förmögenhetsförvaltning
Why are you using ETFs?
I started by analysing a lot of funds. But, after doing some research, I found that most actively managed funds do not beat their indices over time. That is why I have decided, as much as possible, to invest in ETFs.
Within bond funds there is not enough choice, we have only an actively managed fund. But I am aiming for 100% over time.
I feel there is so much lost in annual management charges of 1.5% to 2% or more. It is very cost-effective for the customer, and there is never any suspicion about recommendations, because it is simply the most cost-effective ETF. They are very transparent, so you can see immediately what you have invested in. And you have a lot of flexibility – you can close the portfolio in a couple of minutes.
Name: Philippe Bucher
Title: Managing director, chief financial officer
Why did Adveq adopt Principles for Responsible Investment in Farmland into its fund of private equity funds investment process?
We incorporated the Farmland Principles as part of Adveq’s broader commitment to sustainability, transparency and accountability.
Adveq is already a signatory of the UNPRI and has committed to implementing best practice in responsible investing, so integrating the Farmland Principles into our investment process felt like a logical step.
The Farmland Principles are not simply about environmental sustainability. They provide best practice guidelines for respecting labour and human rights and also cover business and ethical standards as well.
Adveq plans to use its experience as the first private equity investment manager to formally endorse these principles to help others who are interested in making this commitment.