March 18, 2008 / 6:07 PM / 12 years ago

Caution is king for Banque de Luxembourg

LUXEMBOURG (Reuters) - By its own admission, Banque de Luxembourg (BdL) is not the most exciting investor on the block, favoring safety-first government bonds and solid, quality-name equities.

Guy Wagner, Banque de Luxembourg chief economist and managing director of its asset management subsidiary, speaks during an interview at the Reuters Funds Summit in Luxembourg March 18, 2008. REUTERS/Sebastien Pirlet (LUXEMBOURG)

But its conservative approach seems to work, bringing the firm a number of performance awards, the latest being a European Fund Award from fund researcher Lipper and others, presented on Tuesday.

Guy Wagner, managing director of the wealth manager’s asset management arm, told a Reuters funds summit before the award that his firm would rather miss the start of a rally than dive in too early and lose money for its close network of clients.

Take the bank’s preference for safe-haven debt.

“On the fixed income side, we stick to government bonds,” Wagner said. “That helps a lot as most other types of credit have not done very well. It’s boring most of the time, but it helps a lot.”

The stance on equities is similarly cautious. “The idea is to buy quality names and don’t pay too much,” he said.

With the U.S. economy heading for recession and the financial sector going through turmoil, BdL’s approach has been to steer away from stocks where possible.

“In December, we became very cautious and we decreased our equity weightings to the minimum allowed,” Wagner said.

That means, for example, in its balanced fund the percentage of assets that are equities is around 60 percent, the least allowed for that particular investment vehicle.

“In the beginning when you had this correction in August, we thought it might be an isolated problem and you might avoid a recession in the U.S.,” he said. “That completely changed in December. The risk of a recession has increased. You now only have bad news.”

When BdL does buy stocks, meanwhile, Wagner favors emerging Asia over the long term and U.S. stocks for the short term.

The latter might seem strange, he said, given the troubles in the U.S. economy, but a weak dollar should help U.S. companies and the Federal Reserve is providing far more aggressive help than central banks elsewhere.

The wealth manager, in the meantime, is having to deal with clients who are in no mood for risk taking, many preferring cash to other assets.

“You have clients asking if it might be like the 1929/1930s. It’s no longer should I buy but should I sell some more,” he said.

(For summit blog: summitnotebook.reuters.com/)

Editing by Keith Weir

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