Rothschild Wealth Management says it has not engaged in panic selling as a result of the recent mayhem on world stock markets and that it is content with its positioning.

The firm says it is prepared to alter its positions dramatically when and if it is called for, but Dirk Wiedmann, head of investments, argues that the economic picture has not changed fundamentally over the past few weeks. In the developed and the developing world, most statistics have pointed to slower growth, and while the risk of a “double-dip” recession has risen, nothing in the activity numbers suggests it is imminent, according to Wiedmann.

“Yet as is often the case in financial markets, intangible factors have overwhelmed everything else,” Wiedmann comments in the firm’s latest allocation update. “Crucially, confidence in US and eurozone policymakers has been severely eroded."

In recent years, the firm says it has snubbed the "safe" option of investing solely in cash and government bonds to simply preserve capital during the recent bouts of havoc, but instead focused on growing the real value of its clients’ wealth.

“We have generally held a cautious asset allocation, but we continue to embrace opportunities in real assets such as equities, commodities and property and to place money with talented hedge fund managers,” Wiedmann says. “In recent years, while this may involve some short-term volatility, we believe this is the best way to meet our investment goals over the longer term.”

Long-term strategies, at the macro and micro level 

To mitigate risks, Rothschild has held large quantities of gold, which recently rose above $1,700 an ounce, and other precious metals. It has also increased its exposure to safe-haven currencies, for example the Swiss franc, and avoided government bonds issued by weak eurozone members as well as investments in vulnerable European banks.

In fixed income, the company has favoured high-quality corporate securities and AAA-rated government bonds issued by countries with low net debt levels like Switzerland, Sweden, Norway, Australia and Singapore.

Long-term thinking has dominated equity allocation, with a focus on high-quality companies with strong levels of free cash flow, by and large businesses it is prepared to hold on to.

On the bigger picture, Wiedmann thinks the time is now ripe for policy makers to focus to the long term and tackle the debt burden, which he deems to be the root cause to the turmoil in the stock markets.