Patrick Odier knows about families and money; he is a seventh generation member of one of Switzerland’s oldest banking dynasties, part of the firm of Lombard Odier founded in Geneva in 1796 and he thinks his bank’s experience can be a lesson for the Arabian Gulf region’s merchant families.
“We know how to bring families together round a table to manage the common family wealth. We have done that for many years,” he says on a visit to the UAE.
The family-friendly approach is one of the selling points Lombard Odier is using in its push into private banking, wealth and asset management in the region. Like other Swiss banks, the firm sees the attraction of the pool of high net-worth individuals (HNWIs), big wealthy family firms and sovereign wealth funds in the region.
With Abu Dhabi widening its non-oil economic base to include greater emphasis on the financial sector among others, the country is attracting growing interest from banks seeking to grow their local presences.
At the same time, the changing nature of the global private banking business, subject to increasing commercial and regulatory pressures in its traditional US and European markets, has led to a new focus on markets in developing areas to the east, especially Singapore.
The Middle East is seen as the perfect stepping stone to that new business, as well as a business-generator in its own right.
Lombard Odier has had a presence in the region for 50 years but opened a full-time office in Dubai in 2007 as a sign of its commitment to the Gulf.
“Now we have an established presence here,” says Mr Odier. “Clients from round the world are converging through Dubai, which is so well equipped and has the credibility to be a regional base.
“We like financial centres where the top names in industries are concentrated,” he says. “The demand is certainly here for our type of services.”
For Lombard Odier, wealth management consists mainly of protecting existing wealth against risk through varied hedging techniques.
One of these risks is the potentially wealth-destructive effects of a change in generational management and control of a family business, so one of the firm’s specialities is managing the transmission of wealth from one generation to the next.
“We offer the full range of legal, fiscal and patrimonial advice, which is pretty much the same anywhere in the world. Families have got to have the means to continue to invest,” Mr Odier says.
Some big families in the region are increasingly looking at going public on a stock market via an initial public offering to ensure smooth transmission but Mr Odier is not entirely convinced that is the best way to proceed. “They hand over some control to the market and also some privacy. For some, the continuing privacy of their business can be an objective in itself. On balance, I’d advise against IPOs.”
One alternative is a private partnership with investment from private equity investors, he says.
Typical clients in the region are families who earned their wealth through the entrepreneurial activities of a founder many years back.
They have a business side and a private side of family offices.
Other, and potentially more lucrative clients, are the big investing institutions and sovereign wealth funds (SWFs) the region has produced.
Lombard Odier can offer these a range of investment strategies designed to hedge and minimise risk, which is an SWF priority.
The essential rule of investment for Lombard Odier is to be flexible in asset allocation for its clients.
In an era of low interest rates, falling commodity prices and uncertainty on some fixed income investments, the firm will adhere to its risk-minimisation principles to produce balanced portfolios.
“For Middle East investors, the main attraction is European and Asian investment, where our skills are appreciated. In European equities, where there is something of a recovery going on, stock selection is more important than ever.
“The sectors that might be regarded as boring, like utilities, are still very interesting for us,” Mr Odier says.
The global regulatory scene is changing for the private banks and wealth managers and this has big repercussions for banks such as Lombard Odier.
The legendary “secrecy” of Swiss banks has come under fire from authorities in America and Europe and, while private banks there will have to adapt, Mr Odier says the country remains an important part of the world financial scene.
“Switzerland will continue to play a central role, in fact that role increased during the financial crisis because big investors were looking for stability.
“That is what we offer above all. The complementarity between Switzerland and Dubai has increased because of this.”
fkane@thenational.ae
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The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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