Goldman Sachs AM applies the local touch

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Goldman Sachs Asset Management (GSAM) registers its mutual funds throughout Europe, but it finds that a local touch is key when it comes to distributing and explaining them to clients.

Meeting and greeting around Europe

Many of GSAM’s senior staff and portfolio managers are based in London, but their continental travel diaries are booked solid.

Last year, for example, the unit conducted 380 events for advisers of a key distribution partner in Germany, including product training and educational sessions. Chairman Jim O’Neill spoke in front of 3,000 attendees at the Fondscongress in Mannheim.

GSAM also hosts quarterly German events in 15 locations, called the ‘Business Club’, where independent financial advisers exchange views.
In Nordic markets, the $840m asset manager held ten investment clubs in front of about 200 attendees last year, highlighting recent investment ideas and themes.

At the most recent event, in Stockholm last December, GSAM’s China portfolio manager Alina Chiew discussed equity investment in that universe.

Those present then had a private tour of the Terracotta army.
A similar number attended GSAM’s annual Nordic Investment Summit, which also assembled senior staff from GSAM, and external speakers looking at the year ahead.

Separately, co-chief executive Sheila Patel has hosted an event called ‘Power Of The Purse’ for existing and prospective female clients to discuss how financial empowerment of women around the world can contribute significantly to global GDP growth. So far, 250 women have attended events in Sweden, Netherlands, Italy and the UK.

In Switzerland, more than 100 third-party distributors met at an event dubbed ‘Navigating Uncertain Markets’. About double that number were in Zurich at GSAM’s Annual Swiss Investment conference.

The time to talk about risk

Now is an opportune moment for European advisers to discuss, and potentially reassess, how they and their clients understand risk, according to Patel.

During the global crunch, investors worldwide who had equated it with volatility, expanded their investment lexicons to include counterparty, illiquidity and even systemic risk. They may also have reconsidered how they, as individuals, thought about it.

Patel says: “Defining risk in a personal way for individual investors is a key task for advisers. It is fundamental that risk should not ignored and, crucially, that it is explained to clients in a way they understand, not just a way that suits the industry.”

Three-quarters of 289 European and UK retail and institutional investment advisers surveyed by the Economist Intelligence Unit for a GSAM study late last year said designations of investment products as ‘high’ or ‘low’ risk needed to be reviewed in light of the crisis.

Some 87% of European advisers said clients avoided risk more as a result of the crisis, while more than half (52%) felt their clients expected them now “to protect them completely against risk”.

This put advisers in a difficult position, according to Patel. It necessitates “deeper conversations between advisers and clients about risk,” she says.
“Clients and advisers need to work on what the long-term goals of clients are, and what they need to do at the beginning to get there.

“As advisers and clients mature their relationship, you get a more detailed discussion about risk tolerance, and how clients view different kinds of risk.

“Advisers want to respect their clients’ wishes, on the one hand. But if you see a young person with many working years ahead of them being very underweight equities, that is a risk in itself.”

Overall, Europeans seemed remarkably cool-headed recalling the crisis. Some 71% said it was either ‘unusual’, or ‘within expected volatility’, despite the Vix index – widely viewed as a gauge of investor nervousness – hitting four new all-time highs, near or above 70 in two weeks in October 2008.

Between 55% and 70% of Europeans said since the crisis, they found the risk of investing in equities, bonds, private equity, property and hedge funds had increased.

Most (57%) saw commodities as less risky.