LONDON Aug 19 Financial advisers to the world's
richest people report some of their top clients have continued
to make money throughout recent market turmoil by harnessing
sophisticated investments out of reach to mainstream punters.
With equity markets plunging, most investors have suffered
losses to their pension funds and portfolios, but those able to
meet the multi-million dollar investment thresholds of private
equity and some hedge funds are coming out ahead.
"You've got so many investment opportunities that are open
only to very rich people," said one London-based financial
adviser specialising in ultra rich investors.
"The super rich are doing very well. They're getting good
advice, they're getting access to stuff that other people don't
have access to," he said.
Certain investment vehicles, such as hedge funds, can thrive
at times of market stress because they are able to use risk
management tools such as derivatives and make short-selling
sales that make money when an asset price falls.
Some big name hedge funds such as Brevan Howard, Man Group's
AHL and Winton have continued to make gains for their
investors during recent market volatility.
However, because some of the trades made by the funds can
involve higher risks, and in the case of short selling
theoretically infinite potential losses, regulators often place
them off limits to small investors.
"There seems to be a moral argument against shorting, but
from a purely practical point of view it leaves (hedge funds) in
a better position to manage volatility," said portfolio
strategist Johannes Jooste of Merrill Lynch Wealth Management,
part of Bank of America Corp .
"It still remains the domain of the kind of client that can
write a million dollar ticket or more ... From a regulatory
point of view, the industry is not allowed to put the
intermediate or the novice client into a hedge fund."
The fact that the super rich can write cheques for millions
of dollars also means they have exclusive access to the few real
estate assets where prices are still rising, such as the central
London residential property market.
While property prices around the world drop or stagnate,
according to upmarket property consultant Savills , house
prices in the smartest areas of central London are set to be up
8 percent this year.
"London is driven by the international buyer. They are after
the trophy assets. Once you get out of the top end, it's a
little more tricky, because people are dependent on mortgages
and borrowing," said Philip Selway, head of the global property
wealth team at broker Knight Frank.
Selway added that a couple buying a London property earlier
this year were the first British clients he had seen for three
London commercial property is also proving a popular
investment with the ultra wealthy. British private bank Coutts,
owned by Royal Bank of Scotland , plans to launch a
commercial property fund in October open only to clients worth
10 million pounds or more.
"A lot of clients like the idea of being invested in high
quality West End assets," said Julian Lamden, a client partner
in Coutts's private office division, which caters to the bank's
Earlier this year Citigroup raised 330 million pounds
via its private bank for a commercial property fund managed by
Threadneedle, mainly from tycoons and rich families in Europe,
the Middle East, Africa and Asia.
(Editing by Sinead Cruise and Will Waterman)