Europe's financial crisis and its effects on the region's banks are discussed by Dirk Wiedmann of Rothschild Wealth Management and Matthias Hopppe of Franklin Templeton, while Farmland Principles are explained by Zurich-based Adveq and its managing director Philippe Bucher.
Name: Paulo Gonçalves
Title: Asset coordinator
Company: Banco Popular
What is the biggest challenge for asset managers in Portugal?
The biggest problem for Portugal, as for many other countries, is liquidity. Portuguese banks cannot access the interbank market for funding, so they rely mostly on time deposits and there has been a huge outflow from managed funds to time deposits. So on 1 November the Bank of Portugal set an interest rate cap for time deposits at 300 basis points above Euribor.
Above that, the bank has to make a special reserve so it is more expensive for the bank. I think it has had an impact. Some small banks were paying 6% or 7%. Right now it’s quieter and without the interest rates war there was up to October.
We have not had capital outflows out of the country as happened in Greece, but this will depend on the next steps to deal with the crisis in Europe. If people start to believe that the euro will collapse then we can also have capital outflows from Portugal, similar to what happened in Greece.
Gold Share Class
Name: Andrew Raphaely
Company: Ashton Advisors (UK) LLP
Ashton Funds recently put share classes denominated in ‘gold’ on two of your products. Why?
Ashton has launched a gold share class for the Ashton Select fund and Ashton Performance fund. This offering provides investors with exposure to the US dollar returns of the underlying Ashton Funds combined with the return generated from the movement in the gold price.
Ashton’s gold share class enables investors to elect gold as a ‘currency’ in which to denominate their investment. Gold is a yardstick against which fiat – that is, paper currencies are measured and valued.
The steady rise in the gold price reflects the public’s loss of confidence in fiat currencies. The increase in the monetary base well in excess of GDP growth has the potential to undermine the value of fiat currencies, and a gold-based investment provides a hedge against this.
Ashton believes that given the deep-rooted issues in the major developed economies, which cannot be solved quickly, investors need to think strategically about their investment allocations. Central bank policy action taken today will have long-run ramifications on currency values and investors should be prepared for this.
Name: Matthias Hoppe
Title: Vice president and portfolio manager
Company: Franklin Templeton’s Multi-Asset Strategies group
How long will the current crisis stay in investors’ minds?
With human psychology I am not sure if financial markets learn from history. In the long run, they seem to forget very quickly.
Right now we are coming out of the crisis of 2008 and everyone is expecting to be in ‘crisis mode’, and not seeing beyond what the immediate newsflow looks like.
But as soon as we get a bull market, in two to three years’ time, I am not sure most market participants will be prepared for a crisis again.
At the moment markets are very fearful and you do not see large investments in equities, but if markets pull through for a few months you will see a lot of participants going to the equity markets, although much of the crisis may not yet be over.
I think 2012 will be similar to 2011, with trading ranges, then consolidation and recovery.