“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.