As one of the world’s largest financial institutions, Citigroup brings a global perspective to its private banking business.
New York City-based Kristen Bitterly Michell, as head of Multi-Asset Class Structured Notes and OTC Options for Private Client Solutions Group in North America, helps design products for high-net-worth individuals that use Citi's private banking services. She leads a team of capital markets product specialists that works with Citi Private Bank to provide complementary investment strategies to traditional portfolios for high net-worth and ultra-high net-worth clients. The strategies, which include multi-asset derivatives, structured notes, and hedging solutions, are tailored to meet specific financial goals.
Bitterly Michell spoke about current global trends and how she and her team are working to help clients manage the complexities those trends present for wealthy investors.
Private Wealth: What are you seeing as the biggest investment trends for ultra-high net worth investors and their advisors?
Bitterly Michell: One emerging trend in asset allocation management is diversification from traditional fixed income and equities. There will still likely be a continued inflow into equities due to their relative valuation, investors’ search for yield, improving risk-adjusted returns, upside optionality and reduced systematic risk. However, we are not necessarily seeing investors sell bonds to buy equities. Instead, there is a growing tendency to invest in other assets, such as real estate, exchange-traded funds and multi-asset investments.
PW: Are your clients investing aggressively or being more conservative?
Bitterly Michell: With the recent uptick and subsequent pullback in volatility, we saw many investors remaining on the sidelines until the market stabilized. However, as of November 2014, we have seen investors increasing their exposure to equities, with substantial consideration given to both liquidity and entry point risk. We’ve also seen investors use option strategies to hedge existing portfolio exposure and to build hedges into customized structured investments that offer some downside protection, as well as the ability to outperform in sideways markets.
PW: Where have your clients been putting their money since 2008?
Bitterly Michell: The best strategy for dealing with market volatility is to be proactive. Investors shouldn’t put off buying hedges until the time comes when they need them, just as you shouldn’t buy insurance when your house is on fire. This applies to both equity market and interest rate risk for investors with floating rate liabilities.
At Citi, we’ve seen many investors building equity positions over time. However, many were over-cautious post-2008 and missed out on large portions of the subsequent rally in the equity markets. With today’s low interest rate environment, we’ve seen demand over the past couple of years for high-yield equity investments, such as high-dividend-paying stocks and master limited partnerships, as well as option strategies and structured notes that can take an equity view and turn it into a yield generating investment as opposed to a growth investment in the portfolio.
PW: Hedge funds have been getting a lot of attention because of high fees and poor performance. What are you advising your clients regarding hedge funds or other hedging strategies?