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Guiding clients through a pandemic
This article was first published in CEO Middle East magazine on 6 November 2020
How does a Swiss private bank reliant on personal relationships weather a global pandemic? We asked Lombard Odier’s Partner Holding Privé Arnaud Leclercq and Senior Private Banker Soumaya Hissoussi.
How has 2020 been for your clients?
Arnaud Leclercq: It’s not been the year we envisaged, but paradoxically it may have brought us even closer to our clients. Crises focus the mind on what matters: our families and loved ones. Fundamentally, our role is to advise and accompany our clients and their families, and to invest their life-savings, for the long term. Clients had more time to reflect during lockdowns. They spent more time talking to us. Video calls brought us right into their homes, sometimes for the first time. At times, bankers were providing daily updates. At the peak of the crisis, we communicated our outlook: stay firm, there will be a short-term recovery.
Our analysis proved to be right. In general, client portfolios for the Gulf Cooperation Council region have recovered from March lows; most are now in positive territory1. Lombard Odier has weathered more than 40 financial crises in its two-century history. We represent strength and stability, a fact highlighted when Fitch reaffirmed our Group’s AA- credit rating in March 2020. As one of the world’s strongest-capitalised banking groups, investors’ flight to safe havens has benefitted us, particularly in the Middle East.
How has your Islamic finance approach fared during the pandemic?
Soumaya Hissoussi: There is some evidence to suggest that our Islamic finance approach is preserving clients’ capital in a superior way. Our balanced mandate that follows an Islamic finance approach saw a smaller drawdown in the mid-March lows than our conventional US dollar-based mandate, and has since recovered more robustly. It had returned 9.46% year-to-date at the end of August2. I think that the symbiosis between Islamic finance and sustainability is also worth underlining.
Islamic equities have had a strong year, reflecting in part the exclusion of financial services, but mainly the bias towards quality firms with strong fundamentals and solid balance sheets. Our broader sustainability analysis also looks beyond business practices to assess companies’ business models. How adaptable are companies? How prepared are they for challenges, whether that’s a sustainability challenge, or a pandemic and supply chain challenge? This year has shown how important that analysis is.
What do you expect for the final weeks of 2020?
Arnaud Leclercq: We expect an ongoing recovery, albeit at a slower pace than in May/June, as the 'easy' part of the process is behind us. The partial nature of the reopening means economies will not regain full capacity until the virus is eliminated.
Within client portfolios, we have been adapting our strategic asset allocation to a post-pandemic future, with a new standalone allocation to China; allocations to thematic trends including demographics, climate change and digitalisation; to real estate; and to gold. We believe these will help us capture the investment opportunities of tomorrow, without necessarily increasing risk.
1 USD portfolios, across all risk profiles, as of end-September 2020.
2 Past performance is not a reliable indicator of future returns.
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