Pictet & Cie., the Swiss bank planning to target Middle Eastern clients for its $2.5 billion hedge fund, said investors can make money from European assets as the risk of a break-up in the trading bloc subsides.
“We probably see more value in Europe than in most regions of the world in quality world-class companies that have global demand for their products,” Philippe De Weck, the Geneva-based head of total return equities at Pictet’s Asset Management SA unit, said in an interview in Dubai. “The world is not falling off a cliff and some parts are doing quite well.”
Pictet joins Carlyle Group LP (CG:US) in saying European assets may be attractive as a rally in the region’s stocks from a bottom in March 2009 marched at half the pace of that in the U.S. While the Federal Reserve has injected more than $2.3 trillion into the financial system, European banks will have repaid 225 billion euros ($293 billion) of emergency funds by March 8, according to figures from the European Central Bank.
Pictet has about $2.5 billion of assets under management in its own hedge funds, with its flagship hedge fund targeting returns of 3 percent to 5 percent over Libor, De Weck said. It also oversees a $10 billion business allocating clients’ money to external hedge funds, he said. Pictet Asset Management needs local regulatory approvals before promoting hedge funds in the Middle East, De Weck said.
“We’re looking to be part of people’s alternative allocations,” the executive said.
The risk of the European Union breaking up is less than it was a year ago because of policy measures, while export-oriented companies with strong growth prospects have been penalized for being listed on European exchanges, De Weck said. He gave the example of Swiss watch companies as an industry where demand fundamentals in its overseas markets are different from those where the company operates.
“I think policy makers have shown more of a desire to be accommodative in Europe, and back off on the kind of extreme measures that could have led to splintering,” he said. “There are too many curves in the road today to know where we finish but certainly what policy makers have been doing in recent history indicates that prospects of a break up are lower than they were a year ago.”
The euro-zone economy will shrink 0.3 percent in 2013, marking the first back-to-back annual contraction since the single currency’s birth in 1999, the European Commission forecast last month. The outlook for this year masks a split between growth in northern nations like Germany, Finland and Belgium and dwindling output in southern countries such as Italy, Spain and Greece.
Pictet, Switzerland’s biggest closely held private bank, said in October that its increasing asset management staff in the region and plans to recruit more staff in Geneva to serve wealthy Middle Eastern clients. Swiss banks are becoming more dependent on such individuals as a crackdown on tax evasion pushes American and European clients to pull funds from the world’s largest cross-border financial center.
“Our clientele mostly in this space has been in Europe, a little bit in North America and it’s something that we want to make our clients aware of here as well,” De Weck said of hedge fund investors. “It’s the impression that I get in the region that when I talk to people, they think that hedge funds are risky but the word hedge means to protect.”
Pictet and Lombard Odier, which are Geneva’s biggest private banks, plan to reorganize their structures in a move that may presage the end of Swiss bankers assuming unlimited personal liability for losses.
The banks will establish corporate partnerships overseeing limited companies as of Jan. 1, pending regulatory approval, they said in separate statements on Feb 6. The managing partners will continue to own and manage the firms, without unlimited liability for the limited companies.
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