Private banking CIOs prepare for year of uncertainty and risk

The job of the CIO, now intrinsic to wealth management, has become more challenging. Not only for the visibility of the calls they make, but because central banks seem to shift policy on a dime while geopolitical risk appears to be increasing. Euromoney interviews 10 CIOs of leading global private banks.

  Burkhard Varnholt-100
Richard Madigan-100
Steven Wieting-100
Mark Haefele-large
Yves Bonzon-100
  Thomas Moore-100
Sharmin Mossavar-Rahmani-100
Michael Strobaek-100
Florent Bronès-100
Asoka Woehrmann-100


Burkhard Varnholt-100 Burkhard Varnholt, CIO & head of investment solutions,  Julius Baer

Richard Madigan-100 Richard Madigan, chief investment officer at  JPMorgan Private Bank

Steven Wieting-100 Steven Wieting, global chief investment strategist for
Citi Private Bank

Mark Haefele-large

Mark Haefele, global chief investment officer at
UBS Wealth Management

Yves Bonzon-100 Yves Bonzon, CIO of 
Pictet Wealth Management

Thomas Moore-100 Thomas Moore, CIO and head of private investment group Americas at  HSBC Private Bank

Michael Strobaek-100 Michael Strobaek, global CIO,  Credit Suisse Private Bank

Florent Bronès-100 Florent Bronès, CIO at  BNP Paribas Wealth Management

Sharmin Mossavar-Rahmani-100 Sharmin Mossavar-Rahmani,
CIO of  Goldman Sachs Private Wealth Management

Asoka Woehrmann-100 Asoka Wöhrmann, global CIO at  Deutsche Asset & Wealth

As the private banking industry morphs into one leading with advice on the structuring and investing of wealth, the chief investment officer has nowhere to hide. 

"You have to be at the top of your game all the time," says Juerg Zeltner, CEO of UBS Wealth Management, whose firm wins the award for best in research and asset allocation globally. 

"The more you become an investment house, the more your clients want to know what you are doing, and that means you need to build a track record. What were your calls? Were they right? Decisions are much more visible these days. You cannot rest." 

Indeed, last year Euromoney polled five CIOs of the largest wealth managers for their views; the forecasts were mixed. The consensus was that 2014 would be a year to stay underweight fixed income and look for absolute returns. 

Regionally, however, their views varied. All of the CIOs were overweight in Europe, while it was UBS that made the call on being overweight the US. 

It was a surprise, says Florent Brones, CIO at BNP Paribas Wealth Management. "With the S&P500 up by around 24% in euro terms at the end of the year compared with EuroStoxx’s performance of around 2%, it is fair to say that the more than 20% outperformance was higher than expected." 

Surprises were indeed plentiful last year. Michael Strobaek, global CIO at Credit Suisse Private Bank points to the timing of the Bank of Japan’s quantitative easing move. For Mark Haefele, CIO at UBS Wealth Management, it was the government bond market. 

"Despite already low yields, an end to quantitative easing and a stronger US economy, US Treasury yields fell further over the course of 2014," he says. "German Bund yields saw even larger moves lower." 

Oil price crash

Then, of course, there was the oil price crash. "Why exactly the oil price drop was so abrupt and not gradual poses interesting questions," says Steven Wieting, global chief investment strategist at Citi Private Bank. 

"The price decline just realized will drive major performance differences among oil consumers and producers in the coming year." 

The surprises will continue. "While volatility is not at all-time highs, there is absolutely no time to stop," says Zeltner. "Things change more or less overnight. Greece leaving the euro was not on the radar four months ago. Oil at $60 a barrel six months ago would have been a nuts assumption." 

The shift to investment management has put greater demands on the industry, he says. "Back in the old days you could claim to be managing assets and have a sweet spot that you were particularly good at, like fixed income or equities. 

Private banking 2015-186 width

Best private banking services overall 2015
1 JPMorgan
3 Credit Suisse
4 Citi
6 Deutsche Bank
7 Goldman Sachs
8 BNP Paribas
9 Julius Baer
10 Pictet

View more private banking survey results 

"Today, though, it is asset allocation that you need to excel at, and then having a multi-manager platform that sources the best and delivers in a tailor-made way. You need an investment DNA and investment processes that can cope with the complexity of today’s markets. That is unbelievably demanding."

Even more so for banks with global clients because for every region there is a different set of problems to solve, be those cultural or market driven. 

Euromoney asked its private banking survey respondents where client appetite would be this year in terms of asset classes, and the answers varied by region. 

In Asia, western Europe and north America, equities are expected to be the most popular investment, while in Latin America it is fixed income. Appetite for fixed income and structured products in Asia is also thought to be strong, while private equity and hedge funds are expected to be in demand this year in north America. 

The growing appeal of social impact and socially responsible investments is also evident in western Europe and north America.

So what do the experts predict? This year, the CIOs of Euromoney’s top 10 ranked global private banks put their views on the line to share where they expect growth and where the risks could be hiding. 

Which regions do you expect to have the most growth this year?

MH, UBS The most promising region is the US. We expect US GDP growth to accelerate to 2.9% this year as consumer and business spending increases and fiscal policy stops dragging on growth. 

SW, Citi We expect the US and UK to lead developed country growth in 2015. We expect Asia to be the region that benefits most from 2014’s oil price drop. 

AW, Deutsche The US will be the strongest growing developed economy in 2015, and by some margin. US GDP growth of 3.2% in 2015 will be far ahead of around 1% growth in both the eurozone and Japan.