“Looking beyond”: Patrick Odier discusses Lombard Odier’s investment philosophy in Il Sole 24 Ore

Article published in Il Sole 24 Ore, 2 December 2022

“When markets experience turbulence at the same time the industrial world is undergoing a phase of enormous transformation, the worst thing you can do is turn away from your investment convictions and forget about the opportunities that are being created.”

If one were to characterise the philosophy behind Lombard Odier's investment strategies, the notion of "looking beyond" and taking decisions within a long-term vision, avoiding current trends even when they may prove profitable in the short term, would be very appropriate.

The idea is evident in the words of Patrick Odier, who now represents the seventh generation of the family at the helm of the Swiss private bank for over two centuries, and holds the role of Senior Managing Partner. "Clients,” he explains to Il Sole 24 Ore, “appreciate us not only because we are able to limit damage during market downturns, but above all because we try to take advantage of these situations to offer them solutions based on the strong convictions we have built up over the investment cycle. This with the aim of helping them preserve and transfer wealth to future generations.

Our interests are also completely aligned with those of our clients and there are no conflicts, not least because almost 90% of Lombard Odier’s revenue comes from our wealth management activities.

What are the issues you intend to ride?

First of all, the energy transition: decarbonisation, net zero, reduction of emissions, storage of CO₂; today everything revolves around this fundamental topic. Sustainable finance is at the heart of Lombard Odier’s business model and we believe that the transition towards a clean, circular and more sustainable economy represents the greatest investment opportunity of all time.

The transformation underway also concerns agriculture, food and land and we seek investments that can drive evolution in these sectors in a significant way, for example in sustainable food production.

Read more: The CLIC® Chronicles: How global food giant Nestlé is putting regenerative agriculture at the heart of sustainable food

With what kind of instruments?

We do not make choices a priori, because we prefer to adopt a vertical strategy rather than a horizontal one.

What does that mean?

Once we have identified the theme, for example infrastructure related to the energy transition, we choose the instruments that offer the highest return opportunities for clients, whether equities or listed bonds, or real or illiquid assets. And if a direct investment or co-investment with other market players convinces us, we do not hesitate to do so instead of putting the money into specialised funds.

And for traditional markets? What does this correction teach us and how can we get out of it?

We have been through as many as 42 crises during our 226-year history and always emerged stronger. This time we saw a phase in which all asset classes fell at the same time except for the dollar and this has created a very different situation from the past. The reasons influencing market developments also tend to be more structural, such as the return of inflation and the reversal of the trend in rates after years of falling to negative values, but also vary region by region and therefore may require different solutions.

With what consequences for investments?

The probability of moving towards recessionary episodes has increased considerably and we therefore prefer to remain cautious.

This does not detract from the fact that we see value in quality companies, with solid business models and the ability to pass on rising production costs to customers. In the bond markets, investment grade credit has become attractive as a result of those same trends in interest rates, while among sovereigns we prefer US Treasuries. Overall, remain very selective in our fixed income we exposures, but given better valuations in some segments (notably investment grade credit) and well-flagged recession risks, bonds are becoming more attractive in a portfolio context.