• Shift to offshore equity exposure
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Rob Dwyer, Euromoney It’s been a very challenging year in Brazil, with a deepening recession and political paralysis. How protected have clients’ portfolios been and is it too late to add in further protection against down-side risk? Or is now the time to be looking for value in depressed assets?
LR, Itaú Our portfolios are performing very well. We haven’t been very optimistic since last year – mainly after the result of the elections – so clients are well diversified and hedge funds have helped produce a good performance in the last 12 months. Also, this year the currency has protected a lot of portfolios, in terms of real-denominated returns. On average our clients have between 25% and 30% of their portfolios invested offshore, which helped a lot.
Since last April we have been underweight local equities, since the Ibovespa was around 54,000, and we also went overweight in real interest rates when rates were around 6.20% and we got back to neutral when they were around 7%. The big difference between the current situation and 2008 is that clients at this point weren’t very optimistic, so they didn’t have a lot of risk in their portfolios, with no significant leverage.
PM, Itaú Since the [Brazilian securities regulator] CVM’s new regulation, which allows clients to invest overseas in real-denominated products, it really helped the lower end of our client structure. In the past smaller clients had difficulty in investing overseas. However, during the last two years, they have started doing exactly what Luiz said – they have diversified about 25% to 30% of their portfolios into non real-denominated assets.
MA, CSHG I remember our discussion in 2013, when we said that we were preparing for global asset allocation. We saw a strong dollar and a strong US economy, and also an opportunity in Europe, so we have been allocating and investing abroad under CVM Directive 465 on our platform that we had set up in 2009. We launched a real estate fund in Europe, which is doing well. We have been able to connect our boutique in Brazil with our global franchise to invest in global funds abroad. In 2014 due to the local scenario and high interest rates it was hard to carry the positions, we had a lot of meetings and events with clients because we saw a lot of volatility but we were able to convince them to keep the international positions, and now we can see that paid off.
SC, CSHG We have been holding tight to two theses throughout the past three years: the first was that in the last decade, Brazilians experienced a process of getting richer in hard currency that was not supported by the growth in productivity, so it was expected that a reversion would follow. The second thesis was that, unfortunately, because of our macroeconomic policy, it was very likely that Brazil would become more and more a place for rentiers rather than business people.
So, based on these two theses, we did a couple of things. First, we aggressively reduced our portfolios’ exposure to middle market credit, and we kept only very high-grade, very liquid credit. Second, we reduced our beta in the equity portion of the portfolio. We also focused our portfolio towards the offshore market for exactly the same reasons why we saw problems in Brazil – namely, the high cost of energy, high cost of capital, high cost of labour.
We saw the opposite in the offshore market. As a consequence we started thinking that it is better to hold equities overseas and bonds locally. Our equity position became a very small exposure to local equities, a very large exposure to global equities, and some exposure to cash, which has created a very decent cushion throughout declines in the Brazilian stock market.
Finally, we think about the offshore part of our allocation as basically a composition of both tactical and structural. The tactical part has performed marvellously through hedge funds, and that is something that can be seen across the industry. In addition we made a very important move with our clients, by convincing them that low volatility doesn’t mean low risk. In order to protect clients from the painful process of adjustment of Brazilian society, we advised clients that this process would be manifested through a weaker local currency, higher inflation and higher taxes. The tax element is something that is very complicated for us to do anything about – it is a fact of life – but there are lots of things we can do about inflation and currency depreciation. Most of the performance that you can see in our portfolios is coming more from the capital protection strategies, which are proving very effective as the broader markets are becoming very concerned about Brazil’s problems. The risks that we foresaw are now coming true – and perhaps even stronger than we expected.
JW, Bradesco Despite volatility, portfolios are doing quite well. We knew this crisis was coming and we prepared to protect clients’ portfolios. Luiz mentioned 2008 and I remember then that many clients said: ‘I wish I had a greater exposure offshore’. So during the last two or three years a lot of clients have shifted to global investments. At Bradesco, our ultra high-net worth customers have about 30% allocated offshore. Smaller clients sometimes don’t have international global exposure directly, but they can now have through local instruments.
Euromoney Paulo, you mentioned the lower end of the industry investing internationally through CVM465. What assets have they been typically diversifying into?
PM, Itaú Mutual funds and equities in the US. In general, they do that via our discretionary portfolios, which are risk adjusted according to the different risk profiles of our clients.
LR, Itaú Clients are able to buy global equities through CVM465, which was very good, not just to capture the dollar appreciation, but also the actual equity returns in this period.
Euromoney This shift to offshore exposure has obviously protected portfolios in the last 12 months or so, but to what extent do you think this is a structural shift for international diversification or do you expect to see relocation back to Brazil if clients see opportunity in depressed asset prices?
MA, CSHG The shift to international allocation is an important focus of our business and our discussions. We discuss this issue with our colleagues in the US and Europe, where we see the portfolios there that have just between 3% and 5% invested in emerging markets. After 2008, when the CVM allowed foreign investments, we have seen a structural shift to asset allocation abroad, and now we are going to see tactical allocation, so there will be times when you might have a little bit more or a little bit less. This is now forever a part of Brazil’s wealth management industry.
SC, CSHG It is important to differentiate between offshore assets and assets in different currencies. We may have to readjust our portfolios tactically, but that doesn’t mean that you need to get out of global equities, global alternative investments, global fixed income to get back into Brazil; you can just correct for currency exposure.
The Brazilian stock market represents today less than 1% of global stock markets, and is it really possible that all the opportunities in the world are concentrating on this 0.9%? That doesn’t really make a lot of sense.
LR, Itaú Even if the real goes to R$4 or higher against the dollar, we still think it is important for clients to have at least 20% of their portfolios invested offshore. It is a structural position, not a tactical position.
JW, Bradesco It is never too late. If you missed the train at R$3 [to the dollar], it is time to catch it at R$3.50.
Euromoney We discussed this two years ago when the dollar was at R$2.40.
|PM, Itaú We often reminded our clients about that.|
JW, Bradesco The reasons are different: capital protection and diversification. It’s important to tell clients that once they have a position not to do a daily comparison between currencies. That can be tough – clients see international interest rates at whatever, 2%, or perhaps 1%, against 14% in Brazil, which makes it challenging to convince clients that they should be 40% invested in euros or the dollar. But we learnt lessons from 2008, and we are learning them again and clients have to look at the long term. In general Brazilians only move abroad when there is political and economic turmoil domestically, and that is the worst moment to make this move, but we are still learning.
SC, CSHG Brazilians have been exposed to global markets as consumers for the past 10 years, and that has changed the culture, at least for the high-income class that we serve in our business. For those clients, there is no going back now that they have been watching, reading and exposed to different markets. It is no different for their investments – their pocket will follow the way they think now.
Euromoney With the domestic allocation, is inflation-linked fixed income still a good strategy?
SC, CSHG Yes; this is still our preferred asset class within fixed income. We have been very cautious in middle-market credit, and we have shied away from the fixed-rate part, because from a technical perspective this is very much a foreigners’ market: 80% of the fixed-rate market is in foreign hands, which means that if those investors become more concerned about the political situation in Brazil, there could be a potential liquidity and volatility issue. We also saw higher inflation and had to decide to buy protection against that. The problem is, if you go too far in terms of duration, you can get hit, and the end result does not really help, so we decided to keep a short duration – a maximum of three years or so and not really move too far away from that. It has worked well, and we continue to see this trend unfold.
Euromoney How does that match with the other banks? Are you avoiding middle market credit? And are you staying liquid at the short-end of the curve?
PM, Itaú Yes, and we also favour, especially over the past few years, tax exempt debentures, which protect against inflation, avoid tax and are high investment-grade investments. These have been very well-received by our clients. We also have developed a secondary market for these securities, which is something that did not exist four or five years ago.
JW, Bradesco Even though we have high interest rates clients want to keep the door open because of the current environment. They are thinking: ‘I may not leave but I need to see the door open’ to enable a quick move. So we have been favouring inflation-linked notes, which are very effective, liquid instruments. Also, recently we have been issuing a lot of tax-free debt internally: CRAs, CRIs [Certificates of agribusiness and real estate receivables]. These are triple-A names, are liquid and tax-exempt and return somewhere between 120% and 130% of the CDI [Brazil interbank deposit rate]. We would not allow clients to have more than 5%, perhaps 10%, of their portfolio in these instruments. It’s often a difficult conversation because the first time they look at these products they are attracted by the high returns and they ask us to allocate more, but that is too much concentration.
LR, Itaú We have seen two big changes in tax-exempt instruments during the past year. The first is that the public banks are being less aggressive in rates. The second is that if clients had 100% invested in these products, which are denominated in reais, they didn’t protect their portfolio over the last 12 months.
PM, Itaú There was also a change in central bank regulations in May this year, where liquidity is now after 90 days for both LCIs [Real estate credit bills] and LCAs [Agribusiness credit bills], so that has led to a little bit of a change in client appetite for these debentures.
SC, CSHG Holding onto assets in LCAs and LCIs has basically meant losing in dollar terms – clients would have been posting a negative return in dollar terms for the past four years. A low-volatility asset is not low risk when you think about the need to protect your assets on a global scale. The client base that we serve is no longer people who only want to enjoy their lives in Brazil, who want to see their kids study only in Brazil, to buy products and services only from Brazilian companies and providers. For those people, nowadays at least a third of their basket of consumption is basically US-dollar based.
PM, Itaú The implementation of suitability in Brazil has really helped the whole market to be more disciplined. Clients are beginning to have a wider view of the portfolio instead of just looking at specific products. In that respect, depending on the risk profile of the client, allocation is often driven by their liquidity requirements – the liquidity that he needs for his portfolio, the experience that he or she has investing in the markets and their appetite for risk.
JW, Bradesco In my opinion LCAs, LCIs, are a disservice for the private banking industry. The government ends up paying the bill for providing this incentive to rich people. I think it is under discussion at government level to look further and do something about it and the move to 90-day liquidity was a good step.
Also, as Paulo said, there is now more discipline to match your books and, honestly, that was not the case before. Ultra-high net-worth families are starting to learn and diversify more.
Euromoney How suitable are infrastructure bonds for private banking clients? I have been told that fundamentally the types of idiosyncratic risks contained in these bonds are unsuitable for individual investors? Elsewhere in the world it is sophisticated professionals who buy these instruments.
SC, CSHG I understand the point, but you have to bear in mind that a project bond issued offshore is not necessarily the same as an infrastructure bond issued here in Brazil. For a project bond, what you say is correct, because all the coupons and the principal will basically depend on that particular project. However, in Brazil the guarantees that surround this type of issuance are a little bit different. In addition to that, you must bear in mind that there is a fantastic tax advantage for individuals to buy these bonds, which means that you basically get a pick-up in terms of yield of over 100 basis points, which makes it very attractive to HNWIs and UHNWIs.
Euromoney What is your thesis for the future and how will that affect your advice to clients?
SC, CSHG We haven’t changed our portfolios much. If we lose our investment-grade rating as a country, more adjustments will probably come. In the period between 2003 and 2007, prior to obtaining investment grade status, the CDS spread was around 450 basis points. Our stock market used to trade at 7.5 times earnings. Interest rates were in the neighbourhood of 17%. We don’t see all these adjustments coming, but at least some of those will return. In particular, we continue to be very concerned about the equity market and the Brazilian Eurobond market; those two are still too pricey and don’t reflect the size of the adjustment that is necessary in Brazil. When we look at the fixed-income market, even though we continue to shy away from increasing duration largely for technical reasons, we believe that a lot is already priced in. So I think clients are well advised to choose a safe strategy of trying to protect their portfolio and, as we anticipate distressed assets coming into the market, having dry powder to exploit this type of possibility. It is not that we don’t like illiquid strategies, we just want to be properly rewarded for getting out of liquidity.
JW, Bradesco You are talking about a future with very low visibility and we cannot be heroes – clients don’t like heroes because you can be a hero one day and the devil the next. Ours is a medium- and long-term relationship, and so we advise to follow diversification, have a little bit in liquid assets and keep your eyes open because we all agree that we are going to have turmoil, some tough moments in the next 12 to 18 months. At the same time, there will be opportunities. Assets in the real economy are becoming cheaper and I think they will get cheaper. We are facing one of the lowest levels on the Bovespa for the last 10 years and yet still nobody wants to buy equities, but there will be a moment when it is very cheap. But it is impossible to know when that moment will be.
Euromoney How will you get a feel for that? How will you get a sense that there is a trigger point? Or do you see much more up side than down side?
JW, Bradesco First we have to fix our political arena. Until we have a clear picture at government and political level I would not make a move. You never try to catch a knife when it is falling – pick it up from the floor. When we get back to stability, when we have political stability, then will be the time to act. Clients may miss the beginning of the comeback, but that doesn’t matter – don’t be a hero.
LR, Itaú Even if Brazil loses its investment-grade status, we think that between 80% and 90% of the down side to this is already priced in. We agree that the CDS could go higher, but real interest rates above 7% look good to us. If it rises higher than that, we could go overweight. Right now we are neutral. The only tactical position that we have open today is underweight Brazil equities, but looking and waiting for a good moment to buy. What we are trying to do is just wait for a good opportunity to put more risk into the portfolios. In Brazil it is good to wait; you are well-paid to wait. That is what we are trying to say to the clients. The good thing is the clients are not willing to put more risk at the moment – they are not pressuring us – they are fine waiting.
Euromoney What about alternative assets? For example, private equity?
JW, Bradesco There is almost no private equity business going on right now. You can’t even approach clients about it – they don’t want to hear.
Euromoney It is a good time to buy, haven’t the valuations become interesting?
LR, Itaú It might be the time to buy, but it is difficult to sell. It is difficult to sell long-term investments like private equities, mainly in the domestic market right now.
JW, Bradesco I totally agree with what you have said. Clients have a Japanese mentality: it is cheap, but going to get cheaper. I will wait.
SC, CSHG To be honest, we think they are right. We are probably not out of the woods yet in terms of valuation in Brazil. We continue to see the multiples at somewhat elevated levels – for equities in particular. As I said, we had nothing against adding illiquid assets to the portfolio, as long as they pay the right risk premium. That is why we are shifting our portfolio towards illiquid alternatives in the distressed debt arena, where we see opportunities unfolding.
JW, Bradesco The winners will be those that are now rich in cash and waiting for the right moment – there will be great things to do next year. There are a lot of companies being negatively affected by the high interest rate in Brazil, so you have companies which will have to sell some assets sooner or later at the market price, and who knows where that level will be.
Euromoney That suggests there could be liquidity events next year, but this year has been pretty quiet. How have your banks fared with assets under management growth?
JW, Bradesco We all know there are less liquidity events. I am not here to sell Bradesco to anyone, but I would just say that one advantage we have is that we are a bank with more than 20 million clients spread out through the country. Every morning, there are usually between three and five potential private clients from within our retail and mass affluent business. We can grow quite significantly from internal prospects and cross selling.
There are small transactions taking place all over the country that don’t make it into the newspapers. Deals worth as much as R$15 million ($4 million) that, thanks to our national presence, can be captured by the private bank. So we expect to grow between 12% and 15% in 2015. However, for the industry it has been tough, we are fighting amongst ourselves to get the business from the same clients.
LR, Itaú The scenario that we are facing right now in this environment is good for Itaú. We are increasing our share of our clients and we are growing in line with the market.
PM, Itaú Compared to last year, we have gained four times more net new assets in 2015. In total, we grew 21% through July 2015 over the same period of 2014.
Euromoney What drove that four-times performance this year? Is it liquidity events or is it better internal mining of opportunities?
|LR, Itaú We had two big events in the first quarter. |
PM, Itaú Like Bradesco, we have a very strong network that really provides us with a constant inflow of new clients: every day, every week. The upper end of our retail segment, the ‘Personnalité’, has roughly 1 million clients. Through a well-coordinated effort between our Private Bank and Personnalité, we have been able to sustain a constant flow of new private clients.
Euromoney Credit Suisse hasn’t got that retail foundation to rest on; what is your strategy? What has your AuM growth been and how do you see liquidity events?
MA, CSHG We have grown 20% in the last 12 months; we have had a great year in 2015, growing above the market in spite of the scenario. I agree with what João said regarding the increased competition between banks, and we are going to see an even more competitive environment.
For the next 12 months I think we will see good growth, maybe more normal growth than compared to what we saw in the last 12 months.
SC, CSHG We have never enjoyed so much the benefit of being part of a global franchise as in the past three years. If you think about the time when Credit Suisse bought Hedging-Griffo, most of the opportunities were still pretty much in the local market. So although we became part of a global franchise, our clients were not demanding much from it. As the clients started pushing us towards a more diversified and global portfolio, we really started to enjoy the full power of being part of a franchise that manages over $1 trillion in private wealth management.
The second point to highlight is that the beauty of our industry is that it compounds at least the CDI rate. As long as you enjoy the position of being one of the market leaders, you have a huge operating leverage that works in your favour, whereas smaller competitors are struggling to survive in a more difficult scenario. We are able to be one of the players that stand out for interesting performance and for interesting conversations. As Marco said, that combination of interesting conversations and interesting performance is ultimately a good client experience. That is how we position ourselves: as a unique player that is huge offshore, is also very big onshore, and we can offer both worlds.
PM, Itaú Private banking, despite all the crises that we are seeing, has had a very good year. Of course, every time we have volatility, clients get nervous, so they get closer to the bank to seek financial advice. And we are, as an industry, better structured than we were five and six years ago to provide this critical support to our clients
JW, Bradesco One banker who left the market a couple of years ago told me: “We are leaving Brazil because this is a game for the big local boys”. This isn’t a market for a bank that doesn’t have scale to compete because structure costs a lot. This is a very expensive business to run; not only in terms of location but also staff. It is one of the most expensive areas of banking after investment banking.
SC, CSHG The pendulum is swinging back to a more sophisticated portfolio construction. If you think that clients are demanding a more sophisticated global portfolio with more active management, then you start making more of a difference.
Euromoney Have you seen any trends within fees? Increasing use of performance-related fees, that kind of thing?
LR, Itaú It is easier to sell more regulated products with more granularity. Of course when you just sell fixed income or CDI-related products it is very hard to charge. The client doesn’t see a lot of value in this. We try to emphasize that it is not just about beta, alpha is also important, and diversification is also important, and even more than that the advisory is really important. To have good advice you need to have good structure and a big team, so I would say that in a scenario like this it is good for banks like those here today.
SC, CSHG The market microstructure in Brazil seems kind of puzzling because in a way, when you look at our industry, we are heading towards a more concentrated industry in the hands of the market leaders. But that doesn’t mean that competition gets any less fierce than it has been. It will continue to be as it has always been, but probably in the hands of fewer, more important, more capitalized players.
Another interesting thing is that in the end it is not a local phenomenon, it is a global one. Investors always pay for asymmetry of knowledge and information. So as they move towards more sophisticated and global asset allocation, they end up agreeing to pay the higher fee for this advisory service because they feel they are no longer capable of doing everything themselves.
Euromoney Talking of consolidation, what do you see about further exits of private banks in Brazil? João, what can you tell us about [Bradesco’s agreement to buy] HSBC? And can you make any comments about further consolidation? There’s not much more room for banks to consolidate, but what will happen with family offices?
JW, Bradesco We are happy and thrilled with buying HSBC but there is not much we can do right now. We have to wait for the authorities’ approval. But HSBC has a wonderful franchise, and in four-to-six months we will add them to our team. The clients they have are important but it is equally important to be adding senior bankers to our team. Bradesco is a closed career; you have to be hired at a low level and progress internally. When you bring fresh air, that can be so important.
Regarding family offices – they have a nice marketing line when they approach clients about being independent, but in the long term they don’t do more than we can. Family offices are growing in Brazil, substantially for ultra-high families who have their own teams, and for me that makes sense. But I don’t believe medium and smaller clients need a family office. At the end of the day, with all due respect in terms of advisory, we can do a better job. It is a growing business, but clients will realise the advantages of the scale of the private banks: it is a very expensive business and how can the family office support specialist advisers? We all have hundreds of professionals that we can call in a second – they will sit with you and give you an opinion; those guys don’t have those. They depend on us.
LR, Itaú Wealth management and private banking are businesses that require scale to operate profitably. For example, all of us, around this table, can offer asset management, private banking and investment banking services, which makes it very difficult for smaller outfits to compete against the big players. The other big challenge for the family offices is to attract and retain good employees. How can you retain good people? What good, long-term career opportunities can you offer? What we see right now in Brazil is a major concentration in the private bank market; Bradesco buying HSBC and Goldman Sachs pulling out are the last two events in this trend. In fact, we do have high entry barriers in this sector. It is not for the small organizations.
SC, CSHG We have discussed that alpha generation is basically what our clients should be paying for, and this is a function of the depth of our platform and also the competencies that we are developing internally. That is where these smaller competitors, particularly the multi-family offices or single-family offices, suffer the most, because in order to develop a broad and deep platform they need to attract talent to generate this alpha in these competencies. They would need to have much more scale than they do to continue to offer this super-customised type of service. They end up being unable to compete with the large players in scale, and they cannot compete with the large players in terms of having a strong advisory team and a strong platform to compete in a more sophisticated market. It is not just about cutting costs but really adding more alpha.
Euromoney What about this tax amnesty proposal? Do we think that will lead to money flowing back into the country to be managed, or has the 35% limit made it unlikely?
PM, Itaú Thirty five percent certainly is not attractive, but the tax amnesty programme is something that the market needs – Brazil hasn’t had a tax amnesty treaty on foreign investments for over 50 years. However, the timing here – the political situation in Brazil – is really preventing that move from being approved, despite the obvious benefits to our fiscal policy. Another part of this programme that has been criticized is the limited time offered to join the programme – 120 days.
Euromoney Because that would mean only liquid assets could be repatriated?
PM, Itaú The difficulty is more related to the adjusting of fiduciary structures and the legal advice clients will seek prior to adhering to the tax amnesty programme. This could take a long time to accomplish. Our suggestion has been more in terms of extending this window of opportunity for one year and giving a discount for those who can bring in funds before the year-end. That would serve the purpose for the government to get heavier inflows in the short term.
Euromoney That is your feedback to Brasilia. Have you had any response to that feedback?
PM, Itaú Yes. Indirectly, we have been sending messages to the finance ministry and to the senators involved in the approval process. Now let’s wait and see if the tax amnesty programme will go through.
|Private banking, despite all the crises that we are seeing, has had a very good year. Of course, every time we have volatility, clients get nervous, so they get closer to the bank to seek financial advicePaulo Meirelles, Itaú Unibanco|
Euromoney I am guessing that the proposed 35% levy isn’t a particularly good carrot, but is the government thinking that, with the whole international culture of anti-money laundering in terms of transparency, people are focussing on the stick of compliance and thinking: ‘If I don’t do it now, I could get caught punitively’?
MA, CSHG Yes. It is important to stress that this is a global movement. Ten years ago, we wouldn’t have had this conversation. As of 2018, transparency and clarity will be required. So to say whether it should be 35% or 20% misses the point that clients won’t want to fall afoul of having hidden assets after this date. A lot of countries are participating in this agenda, and so it is not whether or not this will happen, but rather when it is going to happen.
JW, Bradesco It is a very positive move and many countries have done this successfully. Some countries have already had their third version. Many families move money away, move money abroad. Brazil is a young country and Brazilians have only had the possibility to open an account abroad for about 20 years.
As for the rate, I think around 10% would be most effective because you would then be collecting taxes on that capital in perpetuity. There are billions of dollars sitting abroad that would start generating taxes from this moment onwards. But if you set the rate at 35%, that forces sales before repatriation. Another point is that it needs a few other adjustments. Most importantly, there needs to be a strong legal framework for avoiding further consequences. If clients are not convinced that there will be not potential consequences for complying with the amnesty, this money won’t return to Brazil. If that is not the case, I think the project will fail.
Euromoney That is obviously based on an international trend for transparency, what about internal trends? What do you think that CVM rule 555 is going to mean for the industry in a practical sense, this creation of two levels of qualified and professional investor and what will the impact be for transparency in the industry?
|We have always been very vocal about how we are remunerated. Clients will continue to be more than happy to pay for a properly diversified, sophisticated portfolio that generates alpha and creates protectionSylvio Castro, Credit Suisse Hedging-Griffo|
PM, Itaú We feel that this is a very good move in terms of bringing more transparency to the market, especially in terms of giving more evidence to the rebates that exist in this industry. Our clients have known about these rebates for quite some time. Our main strategy to comply with CVM rule 555, in this respect, is to increase the fund fees to the same extension of the retrocession fees that will now be paid to clients – to their funds.
MA, CSHG CVM555 increases transparency, and so in terms of regulation it is good. We have been building our platform, being very close and very transparent with our clients. The market is moving that way, from the beginning of October for new clients and July for existing clients. If you have a strong wealth management platform, with a great product area, great investment, a strong advisory team and a strong platform in terms of bankers, service, culture and high returns with capital protection, I don’t see any problem in discussing transparency in terms of remuneration with the client. I think it is part of the industry.
SC, CSHG We cannot set aside the fact that, while these discussions about amnesty are global, the discussion about transparency is also global. From our side we embrace this new trend, because we have always been very vocal about how we are remunerated. Clients will continue to be more than happy to pay for a properly diversified, sophisticated portfolio that generates alpha and creates protection.