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Private bank CIOs highlight the best in alts

Citywire canvassed the views of the CIOs and investment heads of leading private banks asking which alternative areas they favour

Alternatives might seem like the best way to explore the current volatile and low-yielding environment, however not all top allocators are keen to go headlong into this space. 

Citywire Selector collated the views of CIOs and investment heads of leading European and Asian private banks to understand more about their latest asset allocation calls.

In this exclusive report, we asked them about their major overweights, underweights and the biggest contrarian calls at the end of Q3.

The heatmap demonstrates where top allocators stand on the most popular sub-asset classes in the alternatvies space. These views form the part of a wider, dedicated publication which covers equities, fixed income, alternatives and additional investment thinking.

The full publication 'Super Allocators: What private bank CIOs backing and avoiding' can be found here.

*Views collated by Citywire Selector and Citywire Asia teams. Verdict by Margaryta Kirakosian.

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Alternatives might seem like the best way to explore the current volatile and low-yielding environment, however not all top allocators are keen to go headlong into this space. 

Citywire Selector collated the views of CIOs and investment heads of leading European and Asian private banks to understand more about their latest asset allocation calls.

In this exclusive report, we asked them about their major overweights, underweights and the biggest contrarian calls at the end of Q3.

The heatmap demonstrates where top allocators stand on the most popular sub-asset classes in the alternatvies space. These views form the part of a wider, dedicated publication which covers equities, fixed income, alternatives and additional investment thinking.

The full publication 'Super Allocators: What private bank CIOs backing and avoiding' can be found here.

*Views collated by Citywire Selector and Citywire Asia teams. Verdict by Margaryta Kirakosian.

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Hou Wey Fook, DBS Private Bank

We haven’t changed our allocation to alternatives recently, which remains zero in real estate and commodities excluding gold. We are neutral on gold and hedge funds and neutral on the asset class overall.

 

 

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Neo Teng Hwee, UOB Private Bank

Our most recent allocation change was to have a broad allocation across private market funds (private equity, private debt, infrastructure and real estate), which is currently our biggest overweight.

We are cautious on commodity trading advisors, risk parity and systematic fund strategies. We expect opportunities in global macro and might be adding global private real estate funds next quarter.

 

 

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Siriporn Suwannagarn, Kasikornbank

We have added a market-neutral equity strategy. Our major current overweight in the space is property funds and Reits as well as a market-neutral strategy.

The biggest underweight is oil and gold. Our strongest contrarian call is property funds and Reits despite general concerns over their performance. We are likely to add uncorrelated strategies and private market strategies, for example private equity.   

 

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Stuart Parkinson, HSBC

We are neutral on alternatives as an asset class. The biggest recent allocation change from a tactical asset allocation perspective was to keep alternatives as neutral. Instead, we increased the allocation to alternatives in strategic asset allocation.

 

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Richard De Groot, ABN Amro

Within our alternatives, we have taken profit on our real estate allocations and have gone back from overweight to neutral. We have increased our commodities allocation as we foresee a higher oil price going forward. We have no allocation to gold at present.

 

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Philipp Bärtschi, J. Safra Sarasin

We haven’t changed our exposure to alternatives; it is more structural rather than tactical allocations. Our major current overweight is commodities, which is our strongest contrarian call. We don’t have any exposure to gold and real estate and are currently not planning to change our allocation.

 

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Michael Strobaek, Credit Suisse

The biggest recent allocation change was to reduce exposure to global Reits, which is our major current underweight. Our major overweight in the space is hedge funds through an in-house solution that provides a partial hedge for portfolios in case of an unexpected economic slowdown. We are most likely to increase alternative risk premia next quarter.

 

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Markus Stadlmann, Lloyds Bank Private Banking

As we look for alternative yield, we have increase our absolute return fund coverage, and this is the biggest overweight within this sub-group. We are underweight UK property and global Reits in general. At a contrarian level, our exposure to industrial metals, which is an overweight, differs from the crowd. We are most likely to change our factor allocation as our next big move.

 

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Mark Haefele, UBS Wealth Management

Allocation to alternative asset classes is  not applicable to our overall asset allocation.  

 

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Manuela D’Onofrio, UniCredit

Our largest recent allocation change was to reduce alternatives exposure due to poor performance and lack of liquidity. A major current overweight is in short duration alternatives funds and a major current underweight is in less liquid funds, which is the strongest contrarian call.

Most likely change in the next quarter is to trim further to increase the cash buffer and the flexible/unconstrained in-house bonds funds.

 

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Han Dieperink, Rabobank

We don’t have any exposure to alternatives and exited our allocation to commodities in 2012. We are cautious about hedge funds, which have delivered flat returns since 2010 and private equities, which have little value added and are very overvalued.

 

 

 

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Frédéric Lamotte, CA Indosuez WM

Our allocation to the asset class has not changed over the year. We are overweight volatility arbitrage strategies and underweight most CTA and long/short equity funds. Our strongest contrarian view is to be bullish on gold long term, which we might increase next quarter as well as going overweight long/short equities.

 

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Florent Brones, BNP Paribas WM

We are keeping a neutral stance in our alternatives bucket, with no major over- or underweights across real estate, commodities, hedge funds or other areas. That said, we do have an overweight to gold in our Q3 holdings.

 

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Enrique Marazuela, BBVA

Our biggest contrarian bet outside of the normal sphere is on oil. We expect this to drop from the $70-per-barrel level we have at the moment to more around the $50-60 mark.

 

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Christian Nolting, Deutsche WM

Our latest allocation move in the alternatives space was to increase our exposure to gold. We are also bullish on merger arbitrage-focused hedge funds.

 

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Chris-Oliver Schickentanz, Commerzbank

The more aggressive options in raw materials such as oil or industrial metals are too expensive in the current environment.

We are steering away from existing risks and position ourselves more defensively with attractively priced precious metals such as gold, silver and so on.   

 

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Carlos Díaz Núñez, Santander

We are generally neutral on alternatives. Our biggest allocation change was to reinforce the overweight position in commodities. Gold remains is a structural part of portfolio. We are very cautious with regards to any leveraged play, particularly Reits.

We have cut bets regarding absolute return strategies, leading to lower allocation to hedge funds. We may cut back allocation to commodities if prices continue to rise in the coming months.

 

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Bob Homan, ING

Most recently we invested in a long/short commodity hedge fund, while our major underweight when it comes to alternative exposure is hedge funds. We are not planning to change our allocation to alternatives in the next quarter.

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Arne Hassel, Barclays

A recent switch has seen us go underweight real estate but also reducing our tactical underweight in hedge funds; we remain underweight here but to a lesser extent than before.

We are neutral on gold and commodities for the moment while taking no mentionable positions elsewhere in the alternatives universe.

 

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Yves Bonzon, Julius Baer

The exposure to the asset class remains unchanged at 5% in a balanced portfolio.

 

 

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Verdict

The asset class seems to receive very different views from investors as a lot of CIOs held their exposure neutral in the third quarter, with some reducing exposure due to their lack of performance and liquidity.

REITs are one of the least popular bets in the space, while several top asset allocators introduced a bigger exposure to gold.

Where hedge funds are concerned the opinions are split as well with some CIOs backing long/short and merger arbitrage strategies, while others considering the space too lacklustre.

In the fourth quarter asset allocators might be increasing alternative risk premia as well as reducing commodities if their price is going to go up.

 

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