Robert Weissenstein 1978: Graduated with a degree in government from Cornell University. 1978: Financial consultant then portfolio ana lyst at Merrill Lynch. 1984: Switched to working for private banking clients at Chase Manhattan. 1998: Global head of investment for Chase Manhattan's private clients. 2001: After a merger became global head of investment for JPMorgan Private Bank. AMONG THE MOST FUNDAMENTAL tactical decisions made by investors is how to split money geographically and how to allocate it between stocks and bonds. To Robert Weissenstein that, for the most part, is heresy. 'I have found that usually when you make asset allocation changes you make them going in and coming out at the wrong times,' said Mr Weissenstein, global head of private client investment for JPMorgan Private Bank. 'History would show that most people do that. Timing the markets is an extraordinarily difficult and unproductive exercise.' A huge amount of money rides on the investment philosophy of Mr Weissenstein and his colleagues. They look after US$125 billion in discretionary accounts from private clients with at least US$25 million in net worth. 'On an asset allocation level between stocks, bonds and cash, and then the geography, the moves that we make for discretionary management are fairly muted typically,' New York-based Mr Weissenstein said. 'We really think the big question, when dealing with private clients, is what their long-term objectives are. 'You can get whip-sawed tremendously by making big asset allocation changes in the short term.' Typically, private clients' funds are split 60:40 between stocks and bonds and kept flat against benchmarks on a geographical basis. 'What drives our investment philosophy is that security selection is really going to add value at the end of the day,' said Mr Weissenstein. The terrorism on September 11 in the United States was one of the rare occasions where JPMorgan Private Bank made a tactical change to asset allocations, he said. With the lack of visibility then of where the economic and political world was heading, 'we were better off to take some of the risk money off the table if you will'. 'We reduced our equity exposure by 5 to 10 per cent,' he said. 'We couldn't get our arms around a lot of the information we felt we needed to make smart investment decisions and most of our clients would rather have that insurance. 'The value of doing that for our clients was to keep them steady on the course. By taking 5 per cent off the table you probably kept some of them from taking all their money off the table because they felt like at least you were doing something.' Most of the money switched over has not yet been returned to equities, though markets have rallied a long way from their post-September 11 lows. 'The cost of being wrong and being defensive is not very high against the client base that we are running money for,' Mr Weissenstein said. The American co-ordinates the investment process for JPMorgan Private Bank's 110 portfolio managers around the globe. The managers are usually only able to deviate by 3 per cent either side of the sector allocations for their benchmarks. Mr Weissenstein denies that means the managers are put in a straitjacket when they make investment choices. 'We do pay a lot of attention to our benchmarks because we think the noise in investment management is around market timing and around making big sector bets,' he said. 'There is a lot of leeway to manage actively but still have some kind of construction guidelines in the portfolio without it being an indexed approach.' His example of what can go wrong if a fund manager goes too far on following his instincts would be someone who loaded up on technology when it was hot, only to see it melt down. 'The damage that would have accrued to the portfolio could have been huge,' he said. Setting limits on how much managers could deviate from a sector meant they were forced to find better individual stock names. 'You dig and you dig and you dig until you find the names that make sense,' he said. 'The other side of it is if you don't have that exposure, you don't force yourself to look. You can be left out of a big part of the market. 'History would show that all the big moves happen in very short periods of time both ways. 'If you don't have some exposure and don't force yourself, the price on long-term performance can be huge and you can't dig yourself out of that hole.' He believes the big question for investors this year is working out where the global economy and interest rates are heading. He said interest rates were probably bottoming out and moves should begin to lock in gains on long-term bonds by switching into shorter-duration issues. 'We are not really seeing rates going up from these levels, we are not seeing a huge recovery out there,' Mr Weissenstein said. 'We think rates will be reasonably flat and we want to take some of the risk out of the bond portfolio.' He said that on the equity side after the post-September 11 rally, 'the big question is if and when companies deliver earnings'. 'The market probably came back too fast,' he said. 'So you need to be pretty careful in terms of how you approach it. We think [Wall] Street is a little optimistic in general.' The consensus forecast is for operating earnings of US companies in the S&P 500 benchmark to rise 15 per cent this year. 'We think it will probably be half that,' Mr Weissenstein said. For a stock investment with a good chance of success right now he seeks earnings visibility, good cash flows and a strong balance sheet. Some of the bigger names may lead the recovery, he believes. 'Investors, as they get comfortable, will initially come back to the names they know,' he said. 'If I have to throw some names out it is the Gillettes and the Microsofts, names that don't sound all that exciting quite frankly but have stabilised over this last part of the cycle.' With the euro back down at 86 US cents it was probably near a bottom, meaning investors had no excuse for not being fully weighted in Europe. 'The one place we continue to be concerned about is Japan. It is an easy statement to make,' Mr Weissenstein said. 'We still find it very hard to find where enough restructuring has taken place. We are having a hard time finding where the pockets of growth could be.' The government have failed to make the painful policy moves necessary to clear out the excesses left behind by the bursting of a stocks and real estate bubble 12 years ago. 'This is a lot of time now. A lot of the negatives have become pretty entrenched in the economy,' he said. Even if investors could get back on a winning path this year, they should learn to curb some expectations. 'We are working with projected returns in general of around 9 per cent or so today,' Mr Weissenstein said. He claims to practise what he preaches in terms of steady, long-term investment with his own private portfolio. 'The securities I own, I buy for a long, long time,' he said. 'I have stocks I have owned for 10-plus years. 'If I believe in a company I stay with it regardless of what is going on.'