Billionaires look to reduce equities after turning quick profit

FILE PHOTO: Logo of Swiss bank UBS is seen in Basel

By Brenna Hughes Neghaiwi and Simon Jessop

ZURICH/LONDON (Reuters) – Billionaires looked after by Swiss bank UBS <UBSG.S> are looking to move some of their cash out of equities after profiting from an unprecedented sell-off and rapid rebound from March to May, the world’s largest wealth manager said on Thursday.

During the rout in stock markets across the globe in March, UBS’ richest customers took out loans to place billions into crashing stock markets. They are now looking to pull that money from equities and put the profits in illiquid and private assets, UBS’ head of global family offices told Reuters.

Their strategy has helped family offices which manage the financial affairs of the world’s richest beat hedge funds and overall markets to outperform their target benchmarks through May, according to the bank’s survey of 120 family offices, with an average family wealth of $1.6 billion, published on Thursday.

“We had record loans written during the middle of March and the middle of April, of significant family offices who asked us for balance sheet and then went into the market,” Josef Stadler said in an interview. “They bought, for example, U.S. equities, but they didn’t buy $50 million. They bought a billion-plus of those equities to rebalance. And they made a lot of money.”

Known as the “fortress bank for billionaires”, banking half the world’s very richest, UBS said its wealthiest clients serviced by individual family offices were now looking to invest in residential real estate and private equity, or to make corporate and strategic deals.

Stadler said the trend had largely been seen in Asia and he expected it to accelerate in the last quarter of 2020 and into the early months of 2021. As a consequence, he expected equities markets to soften throughout the rest of this year.

But over the longer term just under half the family offices polled by UBS intended to increase their equities allocation in the next 2-3 years.

Asked whether unrest in Hong Kong and its tensions with mainland China had affected investment decisions, Stadler said UBS did not see family office money moving out of Hong Kong to other jurisdictions.

“They made their arrangements years ago, where they want to put themselves on the map,” he said, adding that such clients tended to keep their money in multiple jurisdictions and based their decisions on long-term strategies.

(Reporting by Brenna Hughes Neghaiwi and Simon Jessop;Editing by Elaine Hardcastle)