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Banking

Private banking: How to invest that spare $20 million

The rich expect their investment advisers to be ahead of the herd in adjusting portfolios to market changes. When we asked private banks for model allocations they stressed diversification, but recipes for this varied widely.

WHEN STOCK MARKETS began their three-year downward spiral in 2000, high-net-worth individuals – those with more than $1 million in financial assets – were among the first to move from equities to fixed income. While many pension plan sponsors dithered and finally moved into bonds only when they were already expensive assets, wealthy individuals showed themselves to be more nimble.

Today, the equity bear market appears to have run its course but the equity outlook is uncertain, bonds and credit have suffered a sharp correction, and currency markets may be at an inflexion point as the dollar strengthens and high-yield currencies fall.

With an estimated combined wealth of $30 trillion, high-net-worth private investors are on the move once more and where they are heading might interest institutions. Bonds are out of favour; appetite

for equities remains muted; and alternative asset classes are in demand along with structured products, as wealthy individuals seek to diversify their exposures.

Euromoney asked the world's leading private banks what asset allocation they would now recommend for a fictitious client with $20 million in surplus assets in each of the world's regions.

Having lost substantial amounts of their wealth during the bear market, high-net-worth individuals continue to focus on capital preservation.

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