Guiding clients through a pandemic

How has 2020 been for your clients?

Arnaud Leclercq: It’s not been the year we envisaged, but paradoxically it may have brought us closer to our clients. Crises focus the mind on what matters: our families and loved ones.

Fundamentally, our role is to advise our clients and invest their life savings for the long term. Clients had more time to reflect during lockdowns. They spent more time talking to us. Video calls brought us into their homes, sometimes for the first time.

At times, bankers were providing daily updates. At the peak of the crisis, we communicated our outlook: stay firm, there will be a short-term recovery. Our analysis proved to be right.

In general, portfolios for the GCC have recovered from March lows; most are now in positive territory. Lombard Odier has weathered more than 40 financial crises in its two-century history.

We represent strength and stability, a fact highlighted when Fitch reaffirmed our Group’s AA- credit rating this past March. As one of the world’s strongest-capitalised banking groups, investors’ flight to safe havens has benefitted us, particularly in the Middle East.

How has your Islamic finance approach fared during the pandemic?

Soumaya Hissoussi: There is some evidence to suggest that our Shariah mandates are preserving clients’ capital in a superior way. Our balanced Shariah mandate saw a smaller drawdown in the mid-March lows than our conventional US dollar-based mandate, and has since recovered more robustly.

It had returned 9.46% year-to-date at the end of August. I think that the symbiosis between Islamic finance and sustainability is also worth underlining.

Islamic equities have had a strong year, reflecting in part the exclusion of financial services, but mainly the bias towards quality firms with strong fundamentals and solid balance sheets.

Our broader sustainability analysis also looks beyond business practices to assess companies’ business models. How adaptable are companies? How prepared are they for challenges, whether that’s a sustainability challenge, or a pandemic and supply chain challenge? This year has shown how important that analysis is.

What do you expect for the final months of 2020?

Arnaud Leclercq: We expect an ongoing recovery, albeit at a slower pace than in May/June, as the ‘easy’ part of the process is behind us.

Covid-19 cases are accelerating in the US and notably in Europe, where governments are increasing restrictions, implemented in a more targeted fashion than in the spring. This leaves Asia as a major demand driver for the global economy.

The partial nature of the reopening means economies will not regain full capacity until the virus is eliminated. Within client portfolios, we have been adapting our strategic asset allocation to a post-pandemic future, with a new standalone allocation to China; allocations to thematic trends including demographics, climate change and digitalisation; to real estate; and to gold.

We believe these will help us capture the investment opportunities of tomorrow, without necessarily increasing risk.