What’s different 10 years on?

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Markus Mueller, Deutsche Wealth Management

Watching liquidity

Investors and private wealth managers alike have become more cautious with illiquid investments since the global financial crisis, according to Markus Mueller, global head of Deutsche Bank Wealth Management’s chief investment office.

“The global financial crisis brought us a redefinition of risk management and underlined the importance of diversification and also liquidity,” he told FSA.

Mueller explained that investors who had allocations to illiquid investments wanted to exit the positions during the crisis, but it was problematic to do so.

“So to keep a dedicated liquid position in the portfolio is very important, especially if the client does not have a high risk profile.”

Investors since then have become more sophisticated with regards to how to allocate their assets in illiquid investments, he said.

At the same time, wealth managers have implemented more stringent risk-profiling approaches in recent years, driven by the tightening of regulations across both liquid and illiquid investments after the crisis, Mueller said.

“The regulation of illiquid investments is generally far more rigorous than was the case 10 years ago.”

New regulations surrounding transparency have also prompted wealth managers to offer more detailed advice to clients.

In 2008, Mueller joined Deutsche Bank as an executive assistant to the group chief economist.

He said Deutsche Wealth does not invest in illiquid investments for its usual discretionary portfolios, but did not say whether this was the case before the crisis.

If a client today wants illiquid investments, the bank ensures that it corresponds to the investor’s risk profile, he added.

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