Unwilling to learn

Private wealth managers have huge experience in asset allocation, which they can share with institutions such as pension funds, but the institutions, most of whom are running benchmarked briefs, are far too arrogant to learn lessons from private banks.

So believes Michael Strachan, a pioneering asset allocator who was one of four advisers to run the Abu Dhabi Investment Authority portfolio, believed to amount to more than $60bn (€40bn), in the 1970s and 1980s.

For the last 20 years, Mr Strachan has been running a consultancy, International Asset Monitor, from Guernsey, which aims to teach institutions, as well as family offices, private banks and portfolio managers, how to allocate their assets in a more effective, risk-graded fashion.

“Private wealth managers can teach institutions about how to pursue absolute returns, a practice which most of them have forgotten about,” believes Mr Strachan. His starting point is always to set out risk parameters, using up to nine measures of risk, including those associated with markets, liquidity, use of third party institutions and timing, as opposed to the two variables of markets and currency which he claims many investors rely on.