Retail investors return to risk: BNP/Fortis

LUXEMBOURG Wed Mar 24, 2010 7:33am EDT

LUXEMBOURG (Reuters) - European retail investors are returning to riskier assets after suffering badly in the downturn, with emerging markets in particular providing a lure, a regional funds specialist said on Wednesday.

Andrea Favaloro, European head of retail for BNP Paribas Investment Partners and Fortis Investments, said a lack of returns from cash was beginning to take its toll among clients.

"Our retail client base is moving out of negative-yielding deposits toward more risky assets," he said at the Reuters European Funds Summit in Luxembourg.

Emerging market equities appeared to be the biggest beneficiary of this move, taking second place among European investors after European equities, their most logical home.

"They are skipping U.S. equity , putting it into third position," Favaloro said. "They really realize what is happening there, particularly in Asia and Brazil."

Favaloro said, however, that there was a danger in some areas, particularly Italy, of clients jumping from a super-safe asset, such as a bank deposit, straight into a quite risky one.

"You have to be selective. Emerging markets is a broad concept. Not all markets that are part of this concept are running at the same speed. Selection is the key."

The difficulty of getting retail investors back into riskier assets after the massive stock losses of 2007-8, however, was underlined by BNP Paribas/Fortis's fund strategy.

It has created two ranges of capital protected funds, one for European equities, the other for emerging markets, and is planning more.

Such funds typically attract gun-shy retail investors by guaranteeing that anything from 80 percent to 90 percent of their initial capital will be returned.

The firm has brought 1.4 billion euros ($1.88 billion) into its existing capital protected funds.

Favaloro, meanwhile, noted that there was plenty of scope still left for retail investors to move into risk.

"There is a big pot of money still in bank deposits -- trillions of dollars globally speaking. In the last 12 months we saw recovery in Asia and the U.S. but Europe is a bit behind," he said.

($1=.7439 Euro)

(Editing by Simon Jessop)

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