Matching the strategy to the client
We talked about Asia-Pacific clients. Do you think that clients in different regions have different interests – and if so, how?
I don’t see a difference between European clients and our Asian clients. These themes – whether it’s AI, robotics or the internet of things – are really global trends that all private clients are interested in. That helps us when it comes to offering similar strategies in all regions, and I think it also proves the staying power and relevance of these themes.
I agree. At the end of the day, these technologies are disruptive. But the interesting part is how the old companies, the traditional bricks-and-mortar companies from all over the world, are using the internet of things or machine learning to change and improve their service. Look at Walmart – it’s using algorithms to anticipate how it needs to stock the shelves. That is interesting to me. That’s a great opportunity. But it’s happening all over the world – so I do think that many of these themes are universal and popular with all of our clients.
That’s true. It’s important to be able to pick the winners and losers and discriminate accordingly. Take financials, for example. In the index, we have companies such as BlackRock, JP Morgan and Goldman Sachs, as well as PayPal. These companies are really innovating in areas such as Big Data and machine learning. They are at the forefront of a new wave of fintech and financial innovation. In each sector, you will find some winners and our job is to find those winners and to introduce them to the universe. That is what we do.
We have time for one last question. Given everything we’ve discussed today, how are you positioning your client portfolios to tap into these future trends?
It’s still part of the satellite investments for all our clients. We can also use market volatility as an opportunity to come back to this theme, as we obviously think it has longevity and can provide good returns. It’s our job as advisers to educate our clients and use any market volatility or sell-off to enter this theme.
We are similar, in that we want to focus on those companies and industries that can remain competitive and innovative. From a private banking point of view, our core holdings are going to continue to be those good global equity funds, and we would expect that most of them are going to have a decent exposure to AI and robotics.
At this point, at least, I’d still take that diversified technology fund that can look at a whole bunch of different things rather than a pure thematic fund or index. Of course, this industry is going to continue to improve and continue to be relevant, so we’d never say never when it comes to thematic investing in this way. Right now, I think you would want to build your position over time, but we don’t see it as essential versus holding a very good, diversified technology or global equities fund, for instance.
Over the course of the past year, I think robotics has been a top theme, if not top two along with sustainable investing, when it comes to client conversations. There is demand from clients to talk about some of the more innovative investment opportunities or trends that are out there in the marketplace, and we have an obligation to be on the front foot in advising them as to how realistic that opportunity is likely to be – and the potential rewards that can be reaped.
Clients look to us for leadership in the space. But many will go back and they’ll buy Alphabet or Tencent. They won’t necessarily act on some of these more advanced investment opportunities, which is fine of course. But they want to be informed and they want to know what our views are.
In my opinion, AI and robotics will continue to be at the forefront of clients’ minds, but not necessarily at the forefront of how they invest or where they invest right now, which is ultimately a decision about allocations. But we realise that that could well change in the future.
Unlike Laurent and John, however, we do see some differences in client preferences, which I think reflect some of those different societal norms. European clients are very interested in sustainable investment, whereas in Asia it’s a very hard sell. Robotics and AI have attracted lot of interest in Asia, but there is actually limited interest in Europe.
As everyone has said already, these themes are long-term ideas. We ensure that our clients understand that it’s a long-term theme. It’s our role to check the valuations of some of those names, the valuations of the global funds that we look at and to make sure that we’re comfortable with those different valuations.
We tend to have a core traditional portfolio and then we’ll have a thematic portion as more of a satellite. We’ll advise clients to adjust exposures in those themes depending on valuations and where we are in the cycle.