Lombard Odier offers clients a 'safe harbour'

Lombard Odier, one of the medium-sized Swiss banks nestled along the banks of Lake Geneva, is undoubtedly profiting from the crisis of confidence which has hit clients of competitors such as UBS, the world’s largest wealth manager. While the institutional segment has suffered, there have been net inflows of funds into the private client segment and independent asset management unit, says Patrick Odier, senior partner at the firm, which manages assets of SFr127bn (€85bn). “We benefit from the general destabilisation of worldwide financial markets, as clients see firms like ours as being a safe harbour,” believes Mr Odier, whose institution has no balance sheet debt activity. “This is despite the fact that they know we are a smaller size and publish less information than the others.” His key selling point is independence, through a limited partnership structure and a claim that investment and business decisions are always made in the interests of clients. For instance, on the eve of the crisis, he and his partners decided not to lend out stocks, even though the bank’s revenue would be sacrificed, because clients could be damaged. “Our independence allows us to take these sorts of decision, which makes us attractive to clients looking for deeper service and less conflicts of interest,” he adds. But it has not been enough to just trade on a reputation as a solid, family-owned, traditional Swiss private bank. Lombard Odier, along with its compatriot Pictet, has successfully re-invented itself as an investment boutique with a futuristic focus. Lombard Odier reportedly enjoyed €570m of inflows into its funds in April, second to Pictet's €660m. The thematic approach, encompassing sustainable and socially responsible investing has been particularly successful for the bank, Geneva’s oldest firm of private bankers, founded in 1796. An early step in the re-invention of the bank’s fusty image, was a partnership with Generation Investment Management in 2007. A new vision of profitable but politically correct products, described in the brochures as “what is best for the people and the planet” was unveiled by Mr Odier’s fellow partner Thierry Lombard, together with Generation founders Al Gore and David Blood at the beginning of 2008. Under the new approach, investment professionals examine the investment universe with regard to wider trends in mind - including information technology, healthcare, combating industrial pollution - and apply these to smaller positions in the construction of equity portfolios. “This is an interesting way of thinking about the universe, and saves us from replicating the market and being too geographically specific,” says Mr Odier, previously responsible for the asset management unit, but now taking a broader role in defining the bank’s strategy. “It makes the profession of asset man-agement and portfolio construction even more interesting.” broader world view Lombard Odier has also been helped by the proliferation of investment instruments and products. Areas such as infrastructure investment, for instance, were poorly served five years ago, with a limited number of illiquid opportunities reserved for the top end of the market. “Today, you can buy into the infrastructural development of India and Africa, and you make some very good investments,” he says. Mr Odier hopes the private bank’s ethical and sustainable focus will attract the younger generation and entrepreneurial families who have a broader world view, with an interest that goes beyond returns and diversification. But he acknowledges performance is still the ultimate goal of most clients, many of whom are aiming for a core-satellite portfolio with a subsequent stake in exchange traded funds (ETFs). “For some time, big clients have been disappointed by actively managed portfolios, so they are looking for specialised themes, where they are reducing the actively managed asset to a minimum portion,” believes Mr Odier. Like most Swiss banks, Lombard Odier remains a believer in alternative investments, recommending 15 to 20 per cent hedge fund allocations to the typical portfolio, under the strong conviction they will serve the requirement for uncorrelated investments. He feels an “enormous pressure” from clients who have a vastly increased knowledge of professional wealth management services, but believes these customers are well placed today to guarantee their family’s future, if they make the correct asset allocations. “If you are lucky enough to be a father and can put some money aside for your children, you will have very happy children,” says Mr Odier. “There are new trends in the economy in general, in health, energy generation and infrastructure. There is a fantastic new universe of investment opportunities. Our job as a wealth manager is to explore those universes.”