“Dislikes Europe, likes the US and still likes Asia” might be a crude way of summing up the investment outlook of Société Générale Private Banking Hambros but this is the picture that emerges behind all the nuances.

The recovery – albeit fairly slow – of the US economy and the
continued sluggishness of the eurozone means the French firm is
overweight the US equity market and underweight Europe, Eric Verleyen, group chief investment officer, Société Générale Private Banking Hambros, told this publication recently.

But while worries about Europe remain, Verleyen, who was appointed to
his current role last December, thinks the European Central Bank will
not allow any significant member state to default.

“Ultimately, that the European Central Bank is intervening in the
market will ensure no significant country will suffer a sovereign debt
default. We don’t expect a default by Spain,” Verleyen said from his
offices in St James’s Square.

The Frenchman, who has spent relatively little time in that country
in a career taking him across the world, looked confident when he
explained how he intends to lead the investment strategy of the bank.
He’s got plenty of experience; Verleyen has been a part of SocGen for
some time, joining it in Luxembourg in 2005 as head of discretionary
management for the private bank. In 2009, his role was first enlarged to
include advisory managed activities before taking charge of the
discretionary and advisory management teams as well as products offering
in the country. Earlier in his career, he worked for KBL Luxembourg and
Sakura Bank Luxembourg. Besides Luxembourg, Verleyen has worked in
Belgium, Japan and the Ivory Coast.

His colleagues across the private bank have been busy. In March,
Société Générale Private Banking unveiled a new private investment
banking service for ultra high net worth entrepreneurs who have a
holding company or a family office. It will be headed by Galeazzo Pecori
Giraldi, who will lead a team of senior bankers and account managers in
Europe and the Middle East. Meanwhile, Daniel Truchi stepped down as
head of the private bank, replaced by Jean-François Mazaud.

The investment opinions of Verleyen and his colleagues carry weight;
at the end of last year, the French banking group oversaw a total of
€84.7 billion (around $111.4 billion) in assets.

Setting the tone

At a time when wafer-thin, or even negative, real interest rates make
the role of protecting wealth a tough one, Verleyen said it is even
more important for private banks to have a strong, understandable
investment decision-making process. This is particularly necessary when
so many clients don’t want to take risks with their money.

“You need to have a solid process in portfolio construction, to look
at opportunities and manage risks. If you only look at risks then you
become very conservative,” he said.

“We have one strategy for the private bank at a SocGen level. The
chief investment committee meets every two months and that’s mostly in
Paris. We discuss and define the main macro scenarios. At a local level,
we make more tactical asset allocations. A common reading of the
economy is shared; I really don’t think the right model is to have
portfolio managers doing their own strategies on their own,” Verleyen
continued.

The bank’s investment muscle has increased since it absorbed Baring
Asset Management’s UK and Guernsey private client business. “They [the
Barings team] have a sound track record and a very good process. We are
well equipped to add value,” Verleyen said.  

Approach

“We are not 100 per cent 'bottom-up' in our approach or 'top-down'; it is a more blended approach,” he said.

“We believe in active management; by building portfolios and
implementing strategies. The use of more passive vehicles is something
we do, such as for tactical shifts in portfolios,” he said. “On the
other hand, if we need to invest in an individual stock, then we will,”
he said.

So how does he see the economic outlook?

“We still expect the UK to have growth this year, which is better
than the eurozone as a whole, where there will be no growth,” he said.

He cited the impact of the Bank of England’s accommodative monetary
policy as a reason for the growth in the UK economy. “This was not
something provided by the ECB (until recently),” Verleyen continued,
warming to his theme. This [ECB inactivity until recently] had created a
lot of volatility. The Greek issue also created volatility and Italy
has been under attack, with yields heading to, and briefly over, 7 per
cent. We have seen some weeks when it was quieter. Now people are
looking at Spain.”

“In Europe, we think the depreciation of some financial stocks is
overdone, and there are some opportunities. The picture is very
dynamic.”

“In China, growth is going to be a bit slower but that’s fine,” he
said, adding that the private bank likes corporate debt, and high yield
bonds. It is negative on sovereign debt, where the market would be
vulnerable to any rise in interest rates.

On currencies, he is positive on the dollar and sterling, and said
the euro is too high, especially against emerging markets. He has a
euro-dollar target of 1.20, and euro-sterling target of 1.30.

On the Swiss National Bank’s forex policy, he said the SNB may
continue to try and cap the Swiss franc for some time to come, maybe as
long as a year.

Finally, Verleyen likes some selective parts of the Scandinavian
countries, as many of them have had their fiscal and financial problems
more than a decade ago and have since put their economies on sounder
foundations.