Hervé Ordioni is Chief Executive Officer of Banque Edmond de Rothschild in Monaco and Chairman of the " Market Promotion " Commission of the Association Monégasque des Activités Financières (AMAF). In this period of crisis, here is a topical point.
A flashback to 2019?
In 2019 the Place has developed very well. It was a record year in terms of assets under management, number of employees, and loans granted. Our institution's activity was strong, in line with that of the financial place of Monaco, and even slightly higher according to Banque de France figures. The Investment Advisory division made a significant contribution to our development.
Like the Principality's banks, a large majority of our clients are Monegasque residents; nevertheless we also have many clients from French-speaking Africa. The Rothschild family has been established there since the beginning of the 20th century. Baroness Ariane de Rothschild and her husband are very fond of this continent. One of our Amethis private equity funds invests in African companies. It focuses on companies with an estimated value of between €50 and €200 millions, mainly in sectors providing goods and services to urban populations with the objective of achieving internal rates of return in excess of 20%. There is no limitation of fields of activity, with the exception of the oil and mining sectors. The Edmond de Rothschild Group's subsidiary dedicated to Africa provides development capital to companies on the continent and offers a range of long-term financial instruments, while claiming high Social, Environmental and Governance (ESG) objectives.
Is Socially Responsible Investment important for the Group?
Absolutely. Following the launch of our first Socially Responsible Investment (SRI) fund in 2009, and with an approach to progress that materialised in 2010 with our signature of an international reference standard, the PRI (Principles for Responsible Investment), we have developed solid SRI expertise, confirmed by the confidence of institutional investor clients. At Edmond de Rothschild Asset Management (France), Responsible Investment takes the form of both a specialised SRI range, a showcase for in-house expertise, and, more generally, the integration of ESG factors into the analysis processes of the various funds.
We don't do green washing: SRI has been deeply rooted in the family spirit for generations. For a long time, this strategy may have seemed surprising and risky, but recent events have shown just how judicious it was and now puts us in a good position vis-à-vis our investors.
The Coronavirus brutally affects the organization of banks...
Thanks to the previously developed plan for the business continuity framework, ninety of our employees were able to use Laptop in 48 hours, enabling them to switch instantly to teleworking. The security of transactions is fully guaranteed; thanks to Monaco Telecom it is possible to systematically record all communications. In this period of crisis, the trading room has been particularly efficient: it has managed an activity that has almost doubled in terms of transactions. Investors have shown great maturity, without any panic effect.
It is of course difficult to generate new business in credit, but the recovery is already being felt.
Is it possible to make forecasts for the near future?
In April our management activities take over with great opportunities on the market. From the first days of the downturn, we reduced our equity positions and increased the proportion of gold. We are very liquid. The bond part has suffered a lot, but there will be a lot of opportunities in the high yield. We are of course concerned about the consequences of the pandemic on the US economy. The environment is confirmed on the asset classes: interest rates are close to zero. So you can't invest in money market or bonds. The difficulty lies in determining which liquid assets will move in a direction that is detached from the equity market. Real estate remains an alternative in which we invest in continental Europe, where EdR Real Estate already manages just over €12 billion.
This crisis, unlike previous ones, is above all a health crisis, with economic consequences. We were used to banking and economic crises with social consequences. But overall, the States were quick to announce colossal amounts of aid; the immediate problem lies in the adequate deployment of this aid. In Monaco, the reaction of the Budget and the Treasury was very prompt and proportionate, with strong measures. Let's be positive: if we refer to the 2008 crisis, the equity market rebounded in 2009, and doubled in ten years. In 2020, the Nasdaq once again moved into positive territory, as if technology stocks were the new risk-free asset!