Wealthy investors demand easy exit in rush to simplicity

GENEVA (Reuters) - Wealthy investors, stung during the financial crisis by exposure to complex investments, are not returning to exotic vehicles offering high returns as volatility eases, bankers told the Reuters Wealth Management Summit.

Investors are especially insisting on the ability to make a quick exit from the investments they bet on.

"We don't have a demand for products that take months to unwind ... We are moving back to basics," said Enrique Marazuela, chief investment officer at BBVA Patrimonios, the private banking arm of Spain's BBVA.

Especially out of favor is private equity, on account of the illiquidity of the investments.

"Long lockups are very, very difficult to sell right now," said Alexander Classen, head of private wealth management for the EMEA region at Morgan Stanley Smith Barney.

A report on global wealth management by Capgemini and Merrill Lynch found hedge funds saw assets under management drop 25 percent during 2008 with losses amounting to 17 percent.

Boris Collardi, chief executive of Switzerland's Julius Baer, said private equity and hedge funds are likely to post gains this year, but even this will not tempt clients back in.

"Individual clients are not going to go back. Private clients are sitting on cash, playing a bit with the stock market and some are already getting out again," he told Reuters.

Clients increasingly want to know in detail what goes into their portfolios, even at the cost of lower returns.

"We have seen a shift to more regulated products, with greater transparency and more liquidity," Marazuela said.

The post-crisis rush to simplicity and liquidity has also presented wealth managers with an added challenge of how to maintain profitability when demand is focused on low-margin investments.

"We have much less income on structured products or hedge funds, but on the other hand, especially in Switzerland, we collect a lot of liquidity and cash and the price of liquidity went up a lot," said Guillaume Lejoindre, managing director of Societe Generale Private Banking in Switzerland.

"So we made less on structured products but made more on the treasury side."

(Reporting by Chris Vellacott; Editing by David Holmes)