Julius Baer offers investors advice

At a luncheon in Hong Kong, Beat Wittmann, the Zurich-based CEO of investment products at Julius Baer, speaks to high-net-worth individuals about the outlook for the markets.
ôThe market systemic risk is out, and thatÆs a good thing,ö says Beat Wittmann, the Zurich-based CEO of investment products at Julius Baer, who was advising about 50 high-net-worth clients at a lunch held at the China Club in Hong Kong earlier this week. ôI donÆt think the worst is over for individual players in the financial market place. But weÆve already seen most of the damage.ö

Wittmann, who works at Switzerland's largest dedicated wealth manager, was talking to clients who are largely in a position to ride this economic wave. He engaged in a mock interview with Damien Ryan, a financial communications expert and ex-Bloomberg television announcer, and questions were opened afterwards to the investors themselves, but the idea was to put Wittmann on the spot rather than offer a straightforward banker presentation. It made for a lighter approach to economic analysis, which given the spate of mergers and bailout news over the past fortnight, was a welcome respite.

ôNever underestimate the Americans. They are uniquely able to create a mess, and then set it apart, and move on,ö he deadpans, before adding his serious message: ôIt could be that people are overly pessimistic over the next few months and they will miss an opportunity in 2009.ö

He is still cautious, as he says: ôI donÆt think this will go away quickly. We will see bank failures in emerging markets, the US and Europe.ö But he reminded clients that opportunities always exist when bad news arises.

His specific advice is chock-full of common sense: ôWhen you ask me how to invest over the next few months and years, my answer is a very boring story. I will say to you go back to basics."

As for queries about structured products, he says: ôThereÆs a lot of bashing going on about products as a whole. I would never classify a product as good or bad per se. It has to make sense overall, and on a portfolio basis.

ôI think many of the structured products will be invalidated over the next few months. And hedge funds will be hard hit by redemptions, and so the lesson is very, very clear. The environment is much tougher. The casualties will show up later. And in the meantime you have to be much more careful.ö

For now, when looking at equity investments, he says that you should not only obviously investigate for quality, but also check for liquidity, noting that a very smart company can fail nowadays simply because access to capital is scarce. ôBuy companies that have a crisis-proof management in place,ö he adds.

As for a medium- to long-term view, he says that if a sudden burst of growth occurs in the first quarter next year, donÆt expect it to last as it will simply be a response to ôcheerleadingö in the US. Growth next year will be more modest, across the globe, as consumption will slow.

Regarding the spate of mergers in the financial sector, and the level of government intervention, Wittmann sees that as a positive. Sure, the US is behaving in a rather socialist manner as the Fed bails out Freddie and Fannie and swoops in to save AIG, ôbut itÆs clear these institutions will be privatised again. You needed this crisis to address these issues. I think the system could emerge even stronger and better still.ö
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