Wealthy clients are dipping their toes back into the pool of low-risk equities
Published 04/11/2010 | 05:00
WEALTHY clients are starting to get back into higher-risk investments, inching away from low-yielding assets that provided a safe haven over the past few years, according to some top US brokers.
In early autumn, some people began expressing interest in lower-risk stocks, bankers told the Reuters Wealth Management Summit on Monday.
"We've seen a gradual increase in the comfort level, in terms of exposure to equities," said George Lewis, Royal Bank of Canada's asset management chairman.
Investors are seeking out top-rated, blue-chip companies with a global footprint and a dividend yield of 2.5 to 3.5pc.
Companies meeting these criteria include Intel, Johnson & Johnson and Abbott Laboratories, said Charles Johnston, president of Morgan Stanley Smith Barney, the largest US wealth manager.
Robert McCann, chief executive of UBS Wealth Management Americas, said he saw a similar trend kicking up. He also emphasised companies with a large portion of their revenue generated outside the US. Stocks attracting investors' attention, he said, included Coca-Cola, Colgate-Palmolive and Procter & Gamble.
Wealthy investors have been stocking up on low-interest Treasury bills and other fixed-income securities, shielding themselves against the risk of inflation.
However, many others have sat on their cash, waiting for the market to improve.
"People are coming to the realisation that money funds and short-term instruments don't pay much, if anything," Johnston said.
At the peak of the financial crisis, many advisers encouraged investors to look at gold and precious metals as hedges and safe assets.
"It was the best-performing strategy" (at the time), said Maria Elena Lagomasino, chief executive of GenSpring Family Offices, the largest US-registered investment adviser and a unit of SunTrust Banks.
Executives told the Summit they still saw high interest in precious metals and gold but advised their clients to avoid overwhelming their portfolios with commodities.
"We still like gold here," Robert McCann said.
"We don't say, 'Buy gold, plough into gold,' we say, 'Accumulate over time.'"
Wealth-management executives also told the summit they were looking at investments in India, Singapore -- and especially Hong Kong and China -- for their firms.
"What I'm most interested in doing in Asia is having the presence on the ground to make sure we can maintain and bring the best investment ideas and investment products to domestic clients," said David Carroll, Wells Fargo's vice president for wealth, retirement and brokerage.
Mr Carroll also said Wells Fargo financial advisers had been seeking better retirement options for their rich clients and found possible solutions in emerging market bonds.
Diversification may be the best way to hedge risk, said Jessica Bibliowicz, chief executive of wealth-management and corporate-benefits adviser National Financial Partners.
"The holistic approach is a very big component," she said.
"Getting people to think about their performance, not against an index, but against their own planning."