Pictet: Investors seek global diversification amid tariff concerns

For the time being, global markets have stabilised following the latest announcements by the US regarding reciprocal tariff rates. However, the Pictet Group believes that the psychological impact of these developments, dubbed 'Liberation Day', is already being felt. Investors around the world are responding by diversifying their portfolios and seeking to mitigate currency risks.

Although equities and other assets have returned to pre-2024 levels, the underlying fear of possible future disruption is likely to persist.

In an interview in Geneva, Switzerland, Raymond Sagayam, a Managing Partner of the Pictet Group, remarked that, although market participants were tending to speak about 'de-globalisation', a more appropriate term would be 'regionalisation of interests'. Investors are placing greater emphasis on opportunities in different regions, with many looking to examine and backtest model portfolios. “The real shift and flow of funds has already begun and it is not going to be a short-term phenomenon. I think it is here to stay. Though we have yet to see the biggest shifts,” said Mr Sagayam.

US treasuries can no longer be relied on as a safe haven

“Investors can no longer rely on US Treasuries to serve as a safe haven and need to consider other assets that can deliver meaningful returns. As a result, real estate and alternative investments, including private debt, private equity and infrastructure, will be sought after by the institutional and retail communities for many years to come.”

Mr Sagayam believes that – alongside adopting a diversified investment strategy – the classic multi-asset investment approach based on asset correlations also needs to evolve. While many private equity or real estate funds have a purely US focus, investors are now looking for private assets with a European regional focus or a more global approach.

He points out that investors not only invest in both bonds and stocks within their portfolios but, more importantly, diversify currency exchange rate risks. “Currencies are often hidden killers, like cholesterol in the veins; you just don't know until it suddenly catches up with you.” Driven by the effects of currency diversification, market interest in European assets is just beginning to grow, with European stocks and bonds set to become an aggregate alternative to US dollar assets.

He observes that European inflation is currently under control, with some European equities undervalued. Moreover, the European Central Bank still has room for further rate cuts. Investors are starting to develop a multi-year interest in European assets, and this is a diverse story which extends beyond Europe to include emerging market (EM) equities and local currency bonds for diversified investments.

European central bank has room for further rate cuts, and European assets expected to be favoured

“Even though, liquidity or market size may not individually match that of the US – the US Treasury market, for example, is approximately USD 30 trillion – China and Europe’s government bond markets combined already amount to over two-thirds of the US market. Provided investors views these assets as a basket of investment alternatives, there is sufficient depth and liquidity. For instance, given Europe’s a much increased infrastructure and defence needs, I also expect a concurrent rise in debt issuance.”

Investors show strong demand for Chinese and Hong Kong assets in portfolios

In recent years, EMs have underperformed due to a strong US dollar. Raymond Sagayam, Managing Partner of the Pictet Group, believes that this trend could reverse with the weakening of the greenback. EM local currency debt and equities, including those from China and Hong Kong, could serve as attractive diversifiers.

Mr Sagayam states that “EMs are a strong part of our DNA”. He emphasises that excluding China and Hong Kong from an EM equity portfolio or bond portfolio is likely to result in a significant loss of correlation benefits. For instance, the correlation between Chinese equities and the MSCI World index is close to zero. “We believe that China and Hong Kong represent sound investments and act as excellent diversifiers. Many of our clients continue to demand and expect us to include these in their portfolios,” he adds.

Over the next five years, Pictet will focus on facilitating international, including European, investor demand into Asian assets such as Renminbi bonds or China equities. At the same time, the Group will aim to support private clients and institutions in Asia seeking global exposure. “Asia is likely to be one of the Group's highest growth regions. We have been in Asia since 1981 and currently have 630 employees there, reflecting our strong commitment to both asset management and wealth services in the region," Mr Sagayam observes.

He also highlights that many of the EM economies embarked on proactive rate hiking cycles earlier stage and have managed inflation effectively, positioning them to cut rates. EM currencies also have potential for appreciation, further enhancing the appeal of EM local currency debt. Geographic diversification will continue to make EM assets attractive to investors.

Switzerland's second-largest financial institution positive on the rise of Asia

Founded in 1805, the Pictet Group is Switzerland’s second-largest financial institution and has remained a privately held company for 220 years.

A privately held company with 220 years of history and a strong corporate culture.

François Pictet represents the ninth generation of the Pictet family to serve as Managing Partner of the Pictet Group, and oversees Pictet Wealth Management. He highlights that the Group's private ownership enables it to grow organically, without external pressure to expand into non-core areas or compromise its DNA and culture.

The Pictet Group operates in 31 locations worldwide and employs more than 5,500 full-time equivalent staff. It has four main business lines: wealth management, asset management, alternative investments and asset services. As at the end of March 2025, the Group's assets under management amounted to CHF 730 billion.

François Pictet observes that the Group manages assets for institutional investors, pension funds, family offices and other private investors. It does not engage in any investment banking, retail banking or corporate banking activities, pursuing a straightforward business model aligned with clients’ interests. From a wealth management perspective, large global wealthy families are increasingly seeking to diversify assets across different booking and servicing centres. Switzerland, Hong Kong and Singapore are major booking hubs.

The Pictet Group has seven Managing Partners, including François Pictet, two of whom are Pictet family members. The Managing Partners meet three times a week to discuss the Group’s strategic priorities. Key trends include the geographical diversification of investments, generational wealth transfer, and the rise of Asia.

François Pictet believes Asia will continue to be a major driver of global wealth and economic growth.

Article published in Hong Kong Economic Times on Monday, 21 July 2025, ©Hong Kong Economic Times