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Alternative investments can enhance portfolio returns and lessen volatility.

In today's low-rate environment, many Latin American investors are considering alternatives to traditional stocks and bonds in the hopes of reducing volatility, and achieving higher returns on their portfolios.

"Latin investors are more sophisticated and less risk averse today," says Manuel Diaz, President and Manager, HSBC Private Bank International in Miami. "In addition, they understand the principle of diversification as a means to reduce portfolio risk."

Diaz adds that clients need to examine the entire spectrum of investment opportunities to determine the most appropriate mix of assets. "We advise our clients to take a close look at their long-term personal and financial goals before making any investment decisions," he adds.

As for alternative investments, hedge funds are gaining popularity among affluent Latin American investors. By using a variety of techniques, hedge funds can boost portfolio performance while reducing overall volatility, according to Jose Ortega, HSBC Senior Vice President and Deputy Manager, HSBC Private Bank International. "Clearly, there are risks associated with investing in hedge funds so we encourage our clients to consider both risks and rewards before investing," says Ortega.

Hedge funds generally seek to deliver absolute returns under all market conditions, making them particularly attractive in a sluggish global investment climate. "As such it is vital for Latin investors to understand that hedge fund managers employ very different strategies and to seek out expert, objective advice before making this type of investment," Ortega says.

Structured investment products provide other opportunities for Latin investors. "The traditional asset classes have become commoditized in the past decade," says Jorge Rios, Senior Vice President, Investment Advisory Group, HSBC Private Bank International. "As a result, financial institutions have developed value-added structured products to complement those offerings." Many of these offerings are structured with principal protection at maturity, a feature that has been very well received by HSBC's Latin client base. "We find that Latin clients appreciate products that provide exposure to a variety of markets with the assurance that their principal will be returned at maturity," he adds. "This more conservative approach provides clients with a tremendous sense of well-being," adds Diaz.

HSBC has also been able to help clients diversify their portfolios through the use of open architecture investment vehicles, utilizing its proprietary as well as third party expertise. "We take an objective and professional approach in offering investment portfolios tailored to each client's individual needs, drawing on our own, home grown investment experience and proven, third party investment advisers," adds Diaz. Clients are seeing the benefits of investment strategies that combine open architecture, traditional and alternative investment options. "Clients with a more focused investment appetite often want access to products that employ more concentrated investment strategies, by asset class, sector or region. There has, for example, been increased demand for exposure in the dynamic economies of Brazil, Russia, India and China. While supporting its customers strategies, HSBC continually highlights the value and benefits of diversification across different managers and asset classes," adds Rios.

HSBC Private Bank International is part of the HSBC Group, the "world's local bank". As at June 30, 2005, the HSBC Group had US$1.467 billion in total assets, with 9,700 offices worldwide in 77 nations and territories. Focusing exclusively on the needs of high-net-worth individuals and families, HSBC Private Bank has a presence in 68 locations worldwide, including offices throughout Latin America. HSBC Private Bank International can trace its roots in Miami to 1979, and has served many private banking clients for more than 25 years.

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Comment:Alternative investments can enhance portfolio returns and lessen volatility.
Publication:Latin Trade
Geographic Code:4EUUK
Date:Nov 1, 2005
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