The easy years are over

Skylines. Das Bordmagazin von Austrian Airlines - issue 06/ 2016
November/ December 2016

The rich are getting richer - but slower than before. The bad news: Austrians are generating lower yields than any of their European cousins. The good news, however: follow the advice of Austria's private banks, and you can turn these negative numbers around.
Global financial assets are continuing to rise - although never quite as slowly as they have been since 2011. Although total assets held by private households rose to a record value of 155 billion euros in 2015, as Allianz has established in its Global Wealth Report, this growth represented an increase of just 4.9 percent year-on-year. In the three preceding years, growth averaged out at closer to nine percent. Allianz's Chief Economist Michael Heise has this to say: "The easy years do seem to be over. Relatively low growth looks set to continue." The insurance giant is expecting to see asset growth of around four percent in 2016.
There are numerous different reasons for this weaker trend. First and foremost, it's because prices of shares and bonds are no langer rising as strongly as before. For a long time injections of money by the major central banks had been fuelling the stock market boom. Recently, however, the fluctuations in financial markets have increased significantly. "The extremely expansive monetary policy is slowly losing its effect as a driver of securities prices as weil," Heise says.
A comparison of real asset yields in the Eurozone over the post four years shows the Germans achieving almost the weakest yields. The only place where yields are weaker, in fact, is Austria, according to the calculations by Allianz. Germany achieved a real yield of 2.3 percent a year, and Austria just one percent, where neighbours such as the French, ltalians and Dutch produced between three and over four percent, and the Finns and Greeks around seven percent a year. Allianz describes these differences as being the result of the particularly cautious investment behaviour of the Germans, and clearly also the Austrians. Bernhard Ramsauer, CEO and co-owner of Semper Constantia Privatbank, would seem to confirm this: "The large Austrian assets we hold are actually very conservatively invested." Worldwide, too, the wealthy are currently plagued by real concerns. The Billionaires Report, which UBS produced recently together with consultancy PwC, highlights the fact that the worldwide assets held by the rich have fallen by 300 billion US dollars. The reasons for this development are the trend in the US dollar, falling commodities prices, and the division of major assets within families. The story is a different one in Asia, however; here - primarily in China - one person became a billionaire every three days, statistically speaking. More than half of the world's new billlionaires come from the region. Josef Stadler, Head of Global Ultra High Net Worth at UBS, said this: "The findings of this report will help us keep our eye on the ball when it comes to the important issues, so we can provide our clients with better advice. "
So what would the investment specialists at the major domestic private banks advise their customers to do now to overcome this predicament? At Semper Constantia Privat­ bank, a 15-strong team of investment experts puts together a new investment strategy every quarter. In their most recent assessment, the experts work on the assumption that the US central bank, the Fed, will continue to be very cautious in raising interest rotes - if it does so at all. As a result, the economies of the world's most important industrialised nations could grow moderately, even given the latest political uncertainties in Europe. And China should gradually succeed in creating growth in its economy based on domestic demand emanating from its 1.37 billion people rather than exports alone. Semper Constantia Privatbank is extremely cautious in its investment recommendations, however, sharply reducing the proportion of shares. Only selected quality titles from Europe now remain in the portfolio. At the same time, corporate bonds with the relatively secure status of "investment grade" as weil as the significantly more risky corporate bonds from the high-yield sector are also recommended. One can also just imitate the bank's owners (as weil as Ramsauer, these include industrialists Hans-Peter Haselsteiner and Erhard Grossnig) and buy the 'Semper-owners Portfolio' fund, which invests extremely carefully but has still succeeded in producing a yield of nearly four percent in the post twelve months.
Kathrein Privatbank also manages the assets of a highly conservative clientele. Most often, it represents the families of businesspeople who have placed their assets in a private foundation. Susanne Höllinger, CEO of the Board of Management at Kathrein Privatbank, says this: "We offer tailored investments according to the principle of 'increasing assets cautiously'. This is also the fundamental difference between ourselves and other private banks: we are not just about quick profits. We concentrate on quantitative asset management, and offer solutions for major institutional investors in our special funds." Private investors looking for an investment in the USA will also find what they are /ooking for at the bank; the Kathrein US Equity investment fund is one of the best international performers in its class, with growth of 20 percent per annum in the post five years.
At Salzburg's Spängler Privatbank, too, the emphasis is squarely on tradition when it comes to its relationship with its customers. Werner Zenz, who, together with Helmut Gerlich, forms the Board of Management of the private bank, says this: "We regularly hear from our customers just how pleased they are that an institution such as ourselves still exists. A bank that embodies both tradition and modernity is a rarity nowadays. Perhaps that's also why we've been a trusted partner for so many customers for generations now." When it comes to investing assets, however, the bank uses nothing but state-of-the-art technology and methods. lts asset manager Spängler IQAM lnvest has developed a range of asset management funds capable of generating strong profit even with limited risk. lts balanced share fund, for example, has achieved average annual growth of six percent since being launched at the start of 2009.
Something else shown by the results of the Allianz Versicherung Global Wealth Report is that assets are growing most strongly amongst the middle classes. In view of the high tax burden borne by this section of society, this is actually remarkable. This result could also be explained by the fact that private banks are increasingly opening up to this customer category. As Manfred Huber, Board Spokesman of Euram Bank, puts it: ''All our customers can depend on their concerns being dealt with quick/y and professionally, with a high degree of confidentiality and discretion."