Swiss bank BSI looks for virtues such as consistent behaviour and patient stock selection, explains Luca De Biasi, vice president and head of multi-management and fund selection.
“It is a way for the bank to avoid the risk of selecting a fund without a deep analysis that lead to the purchase of a wrong fund to a client. Of course, we cannot cover all the funds in all the categories, but if a private banker needs a fund not covered by our list, we can carry out an ad hoc analysis, that is based on our strong selection methodology,” he says.
To find new funds BSI looks at internal sources, such as Morningstar and Lipper Investment Management data, followed by in-depth qualitative analysis and face-to-face meetings with the management team.
De Biasi says: “One thing our unit learned over these very difficult years is that being unconventional and sceptical about everything is the best way to achieve the interest of clients and eventually be successful.
However, it is difficult, from the emotional point of view, because being unconventional means very often thinking and approaching issues in a different way. But, at the same time, it is a very effective way to avoid overcrowded and dangerous investments.”
In terms of risk control mechanisms, De Biasi considers the ability of a manager to understand portfolio risks, to build a portfolio based on bets that reflect the manager’s view, and to avoid unwanted risks in the current environment, as well as the ability to guarantee liquidity with limited counterparty risks.
Already before the onset of the subprime crisis, BSI launched a product designed to invest in absolute return funds with daily liquidity, regulated by the European law.
“After the crisis we noticed an increase of demand from clients in this segment,” De Biasi says.
“Many people realised that the lack of transparency and liquidity is manageable. The emotional distress of not being able to collect money when markets were collapsing gave a boost to the in-shore funds. ”We also noticed that many hedge funds started to launch weekly or even daily liquidity classes.”
At the moment, in Switzerland and Italy, investors’ approach to the market is neutral to bearish, a sentiment sustained by a growing scepticism towards the euro project. De Biasi says: “Investors want to avoid risks by having an asymmetric return in today’s environment. This means partially participating at upside, but do not lose money in downside.
Less risky and flexible products are avoured. In Asia, our clients are showing more of a risk appetite in terms of asset classes, including emerging market bonds, emerging currencies, commodities and equity products.”