Since its establishment in 1973, private banking group REYL & Cie has continued to push the boundaries of traditional wealth management services. Here, Head of Alternative Assets at the group’s Asset Management business, Nicolas Roth, shines a spotlight on the bespoke services and tailored advice his team can provide, and shares details about REYL Asset Management’s latest initiatives.
When did REYL launch its Asset Management business?
After having sold RAM – its liquid and quantative-driven asset manager – to Mediobanca, in 2017, REYL & Cie re-launched its Asset Management 2.0 business in 2018, with two distinct initiatives. The first was Asteria, an impact investment manager. Asteria is a fully owned subsidiary of REYL & Cie. The second initiative was Private Assets and Niche Strategies (PANS). PANS is our buy-side platform dedicated only to illiquid assets. It focuses on private equity, private debt, and real estate/real estate-linked strategies, as well as hybrid alternative investments.
What opportunities did the group identify in this area at that time?
The idea behind the creation of PANS came from multiple observations. The first, and most obvious, is the unabated zero interest rates policies across major economies. This is having an impact on bond expected returns and has also pushed equities to record highs. The second aspect is the commoditisation of standard asset allocation, in the sense that 60/40 is becoming a less profitable product for banks, and a less attractive value proposition for clients. Finally, clients themselves are looking to allocate a larger chunk of their portfolios to private assets, not only for yield but also because “privates” are becoming much more popular. They allow for participation in opportunities that aren’t available in a liquid format.
Which types of company does the team typically target?
We do not invest directly in portfolio companies, most of our investments are either via funds or via bespoke structures. We have a strong bias toward credit-linked strategies and our ideal duration window is in the range of two to five years. Above five years, we have found that clients have a hard time projecting their portfolios. Moreover, the Covid-19 crisis has added another layer of uncertainty. Although the height of the crisis now seems to be behind us, it may leave some traumas.
How do you identify new clients and develop new relationships?
With PANS, we have a clear offering in the illiquid space. PANS is composed of four pillars that are designed to serve clients in different ways, depending on their level of financial sophistication. For example, our first pillar consists of a series of fund of funds products (private equity, credit, and RE) that we are using as our port of call into private markets. It is an excellent tool for clients looking to dip a toe into illiquid assets without taking too many risks. For more sophisticated clients, with a larger AUM base, we are offering tailor-made managed accounts – mandates as well as dedicated private assets vehicles. We are also aware that private markets are a new asset class for most clients, and it requires a lot of education. We have developed an iterative process, whereby we work hand in hand with our clients to ensure the most efficient solution for their portfolio is the one that is executed.
Describe the collaborative process with a client. How are goals set, and strategies agreed upon?
The initial conversation with a client is often a very open one, as sometimes clients are unsure of what type of investments is best for them, from a structure and a strategy point of view. Keep in mind that we do not have a static standard offering. Our offering is flexible and mostly client driven. From the initial conversation, we work with the client to understand their exact needs, constraints, and their appetite for risk from an asset and duration point of view. Our clients will have to carry the position for some significant time, therefore it’s of the utmost importance that they have a thorough understanding of their investments. Obviously, we are providing inputs and guiding the discussions, based on our expertise and what we see in the market. From this point on, we initiate this iterative and collaborative process, in which we narrow down which current opportunities would make sense for the client.
From a goal setting point of view, we focus on a global portfolio approach. We understand as much as we can about how PANS will contribute to the rest of the portfolio and avoid doubling down on some risks that the client might already be carrying somewhere else. From a strategy point of view, we focus on either credit, direct lending, or structured-related strategies (including real estate and real estate-linked credit) as this is where the bulk of our expertise lies.
Please provide an example of a recent successful project. What positive feedback did your client provide?
One of our clients is well versed into private markets, and we have been working very closely with them at the start of the pandemic in taking advantage of the dislocation occurring in March 2020. The bank and the team were able to show agility in the way we tackled the situation, as well as identify opportunities where the dislocation originated from liquidity issues in the credit space. Clients appreciate our ability to show them what our competitors usually shy away from. We pride ourselves in our ability to turn over all stones.
Although not a very recent project, we have been mandated by a MENA pension fund to manage nearly €300m in southern Europe real estate and non-performing loans. This mandate allowed the bank not only to demonstrate its ability to deploy capital in competitive and sophisticated markets, but it also opened additional opportunities in the region. REYL & Cie now has a footprint in a region previously untapped by private banks, and in an asset class that’s usually kept for “institutionals” (NPL). It enabled us to follow the NPL wave and to start exploring opportunities in Greece, which is a very niche and promising opportunity in Europe for us.