Memories of the panic that engulfed the world after the collapse of Lehman Brothers in 2008 have hardened rich investors who have held their nerve and resisted the impulse to dash for cash during August's market falls, private bankers said.
Bankers and financial advisers to clients whose wealth is measured in millions say most are sticking to their investments through the turmoil in which major stock indexes have suffered double-digit percentage drops.
Some have even started to seek opportunities to pick up assets on the cheap, in bold moves that contrast sharply with the dumping of investments that characterized the last round of financial crisis in 2008.
"While there was a lot of running around in complete panic last time, I think this time ... I've had more buyers than sellers," said Julian Lamden, a client partner at Coutts, the private banking arm of Royal Bank of Scotland Group Plc, whose portfolio includes some of the bank's richest clients.
Lamden said only one of his clients had significantly sold up — to the tune of about 5 million pounds ($8.2 million) — and headed for cash and other safe assets in the latest round of market volatility.
In contrast, he said, 2008 was a "nightmare."
After the Lehman collapse, "every client call was a panicked call," he said.
Most of the private bankers contacted by Reuters reported many of their clients viewing the market slump as short-lived with the most aggressive of them eager to start buying up stocks on the cheap.
"There's been very little panic selling. There's been more wait and see and tactically choosing when to go into the market again," said Daniel Ellis, head of the investment team at HSBC Private Bank in the UK.
Much of the resilience reflects the fact that at least for now, the crisis remains less acute than the near systemic collapse prompted by the Lehman debacle in 2008, bankers said.
In spite of mounting concerns about the possible consequences of the eurozone's sovereign debt problems, the banking system is better capitalized and has greater access to liquidity than at the start of the 2009 recession.
"If you go back to the financial crisis of 2008/09, credit markets seized up and banks couldn't get funding for love nor money," said Richard Cookson, global chief investment officer at Citigroup Inc's private banking arm in a research note to clients.
"Not this time. It's true that credit spreads have widened, but nothing like as much."
Private bankers also point to a battle-hardened sentiment among their clients who recall the last crash and saw the subsequent, though gradual, recovery.
"The lessons learned in the aftermath of Lehman are sufficiently fresh that people remember even in a very poor environment (that) number one, there was a recovery, and number two, there was opportunity for the patient and the smart. That is fresh enough to cause people not to lose faith just yet," said Johannes Jooste of Merrill Lynch Wealth Management, part of Bank of America Corp.
Jooste also noted many investors' portfolios were still structured defensively, as a legacy of the last crisis, at the onset of the more recent volatility.
Clients have diversified their wealth across many asset classes, currencies and sectors since 2009 to guard against possible aftershocks and will have consequently weathered the recent rout better than the previous crash.
Before 2008, many rich investors were more exposed to certain risk assets such as equities or illiquid investments such as hedge funds and private equity vehicles, which proved complex and hard to exit.
"They are far less pervasively held than they were before. Those (investments) got people into deep trouble and they certainly helped precipitate cycles of panic selling. We've seen a whole lot less of that this time round," Jooste said.
Stefanie Drews, head of the ultra high net worth client business for the UK, Europe, Africa and the Middle East at Barclays Wealth, part of Barclays Plc, also said the rich now had a better grasp of the different strands of the crisis than they had in the run-up to Lehman's demise.
"The major concerns for the market -- a slowdown in global growth, the European debt crises and the recent U.S. debt downgrade -- are generally better understood by our client base in comparison to the issues we faced in 2008," Drews said.
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