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Mukul Munish

Beat Lenherr

1976: Began work for UBS, based in various  Swiss cities.

1987: Began a period lasting until 1993 of  working for Nomura, Julius Bear and  Daiwa Securities in Switzerland, trading  and selling Asian equities.

1993: Became equity fund manager for Japan  and Asia ex-Japan with LGT Bank.

1999: Started work as an investment strategist  with Commerzbank in Singapore.

2001: Started as chief investment officer for  LGT Bank in Asia.

THERE ARE NOT many fund managers who would take the risk of talking positive on the global equities market in the present gloom and doom climate.

Most just clamp up rather than hazard guesses on the state of global markets and the steady decline in equities since February.

The days of talking up the markets, it seems, are behind us, at least for the time being.

Beat Lenherr, however, seems to be a lone positive voice in this sea of negative reports washing over the investment outlook of research houses.

The chief investment officer, Asia-Pacific, at LGT Bank in Liechtenstein says he is not putting his neck out just to be different.

'Am I positive because I just want to be different? No . . . I don't want to be different, I want to be right. And I see the light at the end of the tunnel in the short term, meaning [in the next] three to six months. Between the lines, analysts are already talking about a third quarter recovery next year,' the Singapore-based Mr Lenherr said.

While other fund managers are reducing their equity allocations, Mr Lenherr's fund is buying into equities.

'[We are ] one of the more bullish participants in the equity market, it means you are positive, you are buying. Since the last lows, we have increased our equity allocation and we are looking for a further advancement of global equities markets and to increase our equity allocation.

'There is so much bad news - macro and micro - floating around, companies are announcing bad numbers, economic indicators are negative. So I ask if the numbers are so bad and climate so bleak from top to bottom, why are the equities markets not falling now? So is it some kind of self-fulfilling prophecy or have the markets anticipated the numbers correctly and adjusted accordingly? I think that's the case, I think we should look beyond this quarter and next and look at earnings and macro-economic recovery next year.

'Besides, the relatively depressed equity markets have come down to interesting levels. All these factors like the cancellation of 401(k) redemptions, more liquidity in the market, have combined to make a positive scenario for the equity markets. So I look forward to rising markets in the next few months,' Mr Lenherr said.

LGT's Premium Strategy GIM fund has survived the slaughter in the equities markets, which has taken a toll on other high-risk equities-based funds. But the GIM fund, which is sold only to private clients of LGT Bank in Liechtenstein, takes a fund-of-funds approach and invests globally in equities, bonds, hedge funds, real estate and private equity. That could be one of the reasons the fund has not lost money so sharply as others over the past couple of years.

The fund is intended for high net-worth investors, with a minimum investment requirement of US$250,000, sold in United States dollars as well as euros and Swiss francs.

'We mostly promote in-house investment programmes and we are not for public distribution in Hong Kong and are not publicly listed,' Mr Lenherr said. But GIM has a healthy portfolio of high net-worth investors in the SAR, all clients of the private bank.

The GIM fund was created in 1999, after the 1998 sale of GT Management by LGT. LGT decided to exit the fund management business as it did not have the global distribution network and financial muscle to compete with the big firms.

'There was a clear-cut thinking in LGT management where we wanted to be, with roughly US$60 billion in investment you were not a big player [in fund management] . . . you needed at least US$100 billion,' Mr Lenherr said.

'[Our] task was to find an investment where you can have an equity return but with bond risks. In mathematical terms it means you want to have a capital appreciation of about 9 per cent a year with very low volatility,' Mr Lenherr said.

The fund started as a family fund for the Prince of Liechtenstein, but a year later was opened to bank clients. It is meant for investors with a long-term view. The fund tries to achieve sustained long-term asset growth while avoiding significant fluctuations in value. It has invested 30 per cent in bonds, 30 per cent in equities and 20 per cent each in hedge funds and private equity.

As of August 31, the fund was down 4.31 per cent for clients who had US$10 million or less invested and 3.85 per cent for those who had more than US$10 million tied up. The percentage varies because of the management fees charged - 1 per cent for investors with more than US$10 million and 2 per cent for the others.

The fund has small allocations in Asian markets.

'We are outsourcing a lot of our money and the allocation to Asian markets is also outsourced to fund managers. [We feel] no single person can specialise and excel in all markets.

'Consequently, LGT applies a structured, disciplined selection process to pick the best managers for the individual special mandates of the GIM,' he said.

LGT also has its own team of managers in Liechtenstein who are specialists in managing high-yield portfolios.

'We created this team of manager of managers in 1998 . . . they are very successful. We have a hedge-fund team and a private-equity team.'

Mr Lenherr believes America will be the first economy to come out of recession, followed by Europe.

For Asian markets, he suggests that despite attractive valuations it will be some time before money flows back into regional markets.

'For Asian markets, I don't see international money flowing back. I think after a global recession, the US, by de fault being the global growth engine . . . money will flow there and then Europe and then equity markets in Asia.'



A different take on equities