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Wealth management: Why performance matters

Traditionally seen as great for service, but second best in investment performance, private banks have been polishing up their act, investing in research and third-party products to diversify portfolios and win back market share in asset management from other financial service providers. FTSE PriBIL’s Private Banking Indices show that high-net-worth individuals should be taking private banks’ portfolio management more seriously. Plus we profile three of the banks that outperformed it. Helen Avery reports.

Rothschild: Risk and reward | Lombard Odier: High performance from low risk | Dresdner: Bias and balance


INVESTMENT PERFORMANCE IS among the top-three deciding factors for high-net-worth clients when choosing a financial services provider. According to a survey of almost one hundred private banks by IBM Business Consulting Services, the strongest reason clients give for changing to a new private bank is poor investment performance. Financial services providers other than private banks have traditionally been seen as the ones delivering the investment performance that high-net-worth clients need.

At the end of 2006 it would be hard to find any private banking client that was unhappy with investment returns. Equity markets had performed well. The MSCI World Index was up more than 17% by the end of November, with the Europe Index returning more than 25% over the year. Hedge funds also had a good year despite a few hiccups along the way. The HFRI weighted composite index returned 11.5% by the end of November.

But clients are looking for more than market performance, and private banks need to be able to demonstrate that they are adding value.

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