Investing Trends with Citi Private Bank

There’s no doubt that the past few years have been incredibly unpredictable. The uncertainty caused by the pandemic shutdowns and, more recently, the war in Ukraine has impacted not only the performance of investments in certain markets, but also how investors want to invest.

Ultra High Net Worth Individuals (UHNWIs) have also changed the way they protect and grow their money, and Laurence Mandrile-Aguirre, Citi Private Bank’s General Market Manager for Switzerland and Monaco, believes some of these trends in investment are here to stay.

“Right after the COVID-19 recovery started, the war in Ukraine started – and for European investors, it was something happening very close to home, so it affected customer behavior,” she says.

“They have become more cautious. On the one hand, they were ready to move forward post-pandemic, but new geopolitical concerns and escalation in Ukraine led to a few new investment trends. Reducing exposure to risky assets is certainly one; deleveraging because the immediate effect of this war was to trigger new concerns about the risk of recessions and inflation, especially in Europe, which suspended investments.

“They have become more cautious. On the one hand, they were ready to move forward beyond the pandemic, but new geopolitical concerns and escalation in Ukraine have led to a few new trends.

“Equity trading has slowed and at times investors have simply turned to cash and waited for more clarity, instead of trying to trade the market with short-term views on sectors or stocks.”

Many have put plans on hold to see how long the conflict would last, and the resulting problems with energy and food supply chains across Europe have led some investors to see increased exposure to commodities as a hedge against the harsh environment.

Over the past year, former safe havens such as gold, cash or mandated US Treasuries have not performed as they would have done before.

“The US dollar, for those denominated in various benchmark currencies in EMEA (Europe, Middle East and Africa), was one of the best macroeconomic hedges as it rose 10% and clients sought ways to ensure they protect their portfolios against higher rates and inflation hedges,” adds Laurence.

Invest with impact

There is no doubt that the tangible effects of climate change in EMEA have also influenced investment choices. “The heat waves we’ve seen in the northern hemisphere have illustrated concerns about global warming among our customers,” she says.

“They’re worried about it because if you think of EMEA, the Middle East already had very hot temperatures and in Europe we really raised the issue of global warming backed by scientific reports and made it a topic. key to the agenda in everything from climate-specific conferences to economic rallies.

Laurence also noticed that the desire to invest with a purpose is certainly growing. “There are some great investment solutions out there on impact investing, anything about renewable energy, climate, diversity, wellbeing is definitely of interest to investors,” she says.

“By 2050, renewable energy will provide 44% of the electricity needs of the United States – currently it’s 21%, so there will be a lot of investment needed to produce renewable energy, and there is a lot of initiatives with governments or in concrete actions.”

Laurence Mandrile-Aguirre

“ESG and impact investing are here to stay. In many conversations we have with clients, the topic comes up.

There hasn’t been the same progress in terms of helping with the taxonomy defining the challenges around social engagement, but environmental, social and corporate governance (ESG) investing is certainly proving popular at the future.

“Our clients are very often involved in philanthropy themselves, on subjects close to their values ​​and their hearts, where they try to have an impact on a specific subject. But what we are seeing now is that from a broader investment perspective, there is more engagement, interest and a clear need for more awareness on certain specific topics. When we do portfolio reviews, clients are very curious to understand how their portfolios relate to the UN Sustainable Development Goals, especially socially,” shares Laurence. The pandemic and the war in Europe have shed light on how the three concepts behind E, S and G are ultimately linked.

“We’ve seen a lot of progress in terms of measuring the sensitivity of client portfolios or exposure to these themes. They ask for ways to contribute. What we are seeing now is that from a broader investment perspective, there is more engagement, interest and a clear need for more awareness on certain specific topics. But there is still work to be done in terms of taxonomy and impact measurement, as well as defining how investments should be designed to attract massive inflows of private capital towards social considerations.

Inform and dialogue with the wealthy

Citi Private Bank realizes that this area of ​​growth is also where it is essential to provide thought leadership and analytical tools to investors, as well as providing advice in this emerging and established market, bringing together the public and private sectors and the flow of capital from UHNWI to impact investing. .

Investors are keen to invest in education as a social theme, either online (edtech) or through innovative means that can help overcome the barrier to quality education in some emerging markets where access to this is limited. Especially when it comes to girls who are often marginalized. Citi Private Bank aspires to play a key role in terms of providing content, information and investment opportunities for clients who have wealth and want to participate,” says Laurence. “I think financial institutions play a key role in attracting private capital from high net worth individuals into these global efforts.”

“We have a newly defined taxonomy in Europe which is very helpful as it reduces confusion for investors and enables us to provide the right solutions to raise funds and accelerate progress.”

This year, the framework and the report on environmental issues have certainly been established, but there is still work to be done on social issues.

Look forward

So where will UHNWI be putting its money in the coming year? Laurence says, “ESG and impact investing are here to stay. In many conversations we have with clients, the topic comes up. »

And within the sector, Laurence thinks concessional blended finance – where public money and private money combine within a defined framework – will grow.

“We are very committed to being a key player when it comes to providing content and information, as well as offering investment opportunities to clients who have the wealth and want to participate.”

“We play a role in terms of providing content, information and investment opportunities for clients who own the wealth and want to participate.”

Asset allocation will return in response to central bank interest rate hikes. Some clients had reduced their exposure to fixed income securities to very low levels.

“Yields are back and that opens up a lot of opportunities for investors. They are likely to rebuild their exposure to fixed income and alternative investments. A year ago, you couldn’t get exposure to stocks and preserve capital,” she says. Higher yields combined with higher levels of volatility create a favorable environment for capital markets and hedge funds.

It is unclear whether investor appetite will return to Chinese stocks, but it seems likely that the digital technology, cybersecurity and food safety industries will also attract interest and investment.

“After any crisis, new investment themes usually open up for private equity managers to seize opportunities in the event of market dislocation,” says Laurence.

“We had COVID-19, the war in Ukraine, the risks of recession, inflation and all the dislocation of the energy and agricultural sector. I’m sure this will probably open the door to a good vintage of returns for private equity. »

About Laurence Mandrile-Aguirre

Laurence Mandrile-Aguirre is General Market Manager for Citi Private Bank Switzerland and Monaco, overseeing the provision of private banking services to high net worth individuals and family offices based in Switzerland.