Top banker's tip - look to emerging markets

Pictet has been operating in Dubai since 2007 and the Swiss firm's managing director Omar Mirza praises the city's strong entrepreneurial culture.

Some Swiss banks have been having a hard time of it lately, but Omar Mirza, the managing director of the 200-year-old Geneva-based Pictet's business in the Middle East sees opportunities for growth.

Pictet opened in Dubai just as the financial crisis was brewing. How has business been since then?

We opened our representative office in Dubai in 2007, and our business continues to grow in line with our expectations. We are pleased with the client base we have developed in the Middle East during the past five years.

Why did you choose Dubai?

Our strategy has been to open offices where on-the-ground support for our institutional clients is necessary and where we have significant opportunity for growth. The emergence of a strong entrepreneurial culture, coupled with greater institutionalisation of investment processes and teams, has provided us with increased asset management opportunities in these markets.

Regarding Dubai specifically, we chose the emirate for a variety of reasons including proximity to key institutional investors, strong infrastructure to facilitate travel around the region and an established regulatory framework, as well as a good quality of life for our staff.

Who are the main clients in the region for your asset-management services?

Our primary client base comprises both institutional clients like sovereign wealth funds, central banks, pension funds and family offices. We have identified promising future growth opportunities for our asset management business, particularly with large pension funds, sovereign wealth funds and central banks.

Our Luxembourg-based mutual funds are also available to investors in the region via well-established insurance platforms and distributors. In line with the new SCA [Securities and Commodities Authority] regulations for mutual funds distribution in UAE, all our mutual funds are registered with SCA before any local distributor can promote them to any UAE-based investor.

Where does Pictet stand on the "end of equities" debate? Shouldn't investors be more interested in fixed-interest products now, especially in the Arabian Gulf region?

As far as valuations are concerned, equities are cheap relative to government bonds but on absolute, long-term valuation metrics they appear fairly valued at best.

In our view, the investment appeal of higher-yield fixed income assets such as speculative-grade corporate debt and emerging market sovereign bonds remains strong following acceleration in the pace of monetary easing in both the United States and Japan.

Emerging market (EM) debt looks particularly attractive given that the base rate differential between developed and developing economies has widened over the course of the year and this rate gap should provide strong support for emerging market currencies, one reason why we favour local over dollar-denominated EM debt.

Tell me about "thematic global equities". How does the concept differ from conventional equity investment?

Conventional global equity strategies are mostly built around cap-weighted indexes and look at past winners, while in thematic global equities strategies we look at future winners after identifying key drivers for each theme.

"Themes" or "megatrends" are profound developments that will shape the progress of human civilisation over decades. Some of these trends, such as the environmental challenge, will have a significant impact in determining our future.

Global themes are subject to persistent, secular changes in social and economic factors such as demographics, lifestyle, regulation and environment. We believe that the basis for successful theme investment lies in identifying these megatrends, because they hold the potential for excellent long-term growth, irrespective of short-term or speculative fluctuation.

Pictet has been a pioneer of thematic investment, launching dedicated theme funds in a systematic way. For example, the Pictet Biotech - launched in 1995 - was one of the first funds to invest in biotechnology stock. In 2000, we were the first to launch a water fund, which remains one of the few funds of its type. In 2008, we launched the first timber fund investing in listed companies covering the entire timber value chain.

How does Pictet's "partnership model" differ from other wealth and asset management structures?

Pictet is a partnership owned by eight managing partners who stand personally and entirely liable for the bank's commitments.

This means that we have total financial independence, control the entire chain of operations and do not need the approval of shareholders when taking decisions.

This also means that we adhere to the strictest standards in managing the risks inherent to our business, always acting in the best interests of our clients. As we have full legal liability for investments, our interests are 100 per cent aligned with that of our clients. We do not engage in any form of investment banking, or issue any commercial, mortgage or unsecured loans.

What does the future hold for Swiss private banking and asset management?

In times of financial uncertainty, there is flight to quality and this has become increasingly apparent recently. The Swiss private banking industry has proven itself as safe haven for investors over the past 300 years and I believe this will remain in the future.

Furthermore, the recent global financial meltdown and some of the causes for it, is making even institutional investors return to basics on asset management side. This will benefit houses like Pictet, which have always tried to keep things simple by staying away from investment banking, proprietary trading and commercial/corporate lending.