Wealthy investors ready to deploy more cash

By John McCrank

TORONTO (BestGrowthStock) – While wealthy investors are still nervous about the markets, many are well positioned to move out of cash and capitalize on global opportunities as they arise, a senior Merrill Lynch executive said on Thursday.

“This market has been a challenge,” said Christopher Wolfe, chief investment officer for the Private Banking and Investment Group at Merrill Lynch, owned by Bank of America (BAC.N: ).

Wolfe said the firm’s advisers, who serve clients with at least $10 million of investable assets, have worked to diversify portfolios over the past couple of years and as a result, most clients are now “relatively calm and engaged.”

“That said … there is a little more anxiety with market performance, certainly the political environment and the situation in Europe and that keeps a lot of high-net-worth clients on the edge,” he said in an interview.

Managing perceptions about how the market can behave and having clients revisit and reassess their objectives are important, he said.

Many investors have only just dipped a toe in the market and are still seeking comfort in large cash positions.

“There is certainly a lot of cash out there, there is really no arguing that,” Wolfe said. “There are studies that have commented on this and I observe it in the way that clients are looking at the markets today.”

That doesn’t mean the wealthy aren’t looking for opportunities. Even with interest rates essentially at zero from a cash perspective, investors are looking across different types of investments, from money market funds to deposits and so on, Wolfe said.

On the investment side, he said that top-end clients are making use of things like structured investments that have derivatives in them as a way to buffer exposure to markets. Real assets, like commodities, are also popular.


Wolfe said he has seen renewed interest in positioning portfolios so that they generate as much income in the present as possible through fixed income and the like.

By generating a lot of income, clients are better able to rebalance portfolios when risks arise, or to take advantage

of opportunities that may come up when the markets are down.

“It’s really about diversifying the sources of income,” he said, adding that the firm’s advisers are talking to clients about owning more than just muni bonds for the income part of their portfolios.

“It includes stocks and in some cases corporate bonds that look relatively attractive. It includes bonds outside the United States, and when you put that together, that message of diversification is another meaningful component of managing risk in this environment.”

Wealthy investors are increasingly taking advantage of “pressure points” on a global scale, and in the past couple of months, that has included strategic investing in Europe.

“We’ve talked about European equities being relatively cheap and that’s one area we’ve seen interest,” Wolfe said.

Private clients have also moved toward globally flexible strategies, such as global asset allocation mutual funds, where the hedge fund side has been active.

“This response of moving toward more globally flexible managers, I think, has really been driven by the fact that we expect more volatility, more cyclicality in markets and need more flexibility and to be more tactical in this environment.”

($1=$1.04 Canadian)

(Reporting by John McCrank; Editing by Frank McGurty)

Wealthy investors ready to deploy more cash