Offshore: If there’s something strange, who you gonna call?

Offshore havens for worried money are doing brisk trade these days. But the departure of many global players from South Africa since the banking rush of the early 2000s is what Swiss outfit Banque Syz, led by its outspoken founder and CEO Eric Syz, is looking to capitalise on. We asked him whether we really need another bank in South Africa:
We’ve acclimated to emerging markets – Africa and South America – and there’s a tremendous amount of opportunity where people can create a lot of wealth. When you create wealth at some stage you have to start thinking: how can I shield that from local risks? So there is a need for these people to have, somewhere, in a safe haven, access to their money – and money that has been declared: since I started the bank we have never sold bank secrecy as an asset.
So does political risk play in your favour?
Yes to some extent but the political risk is also the opportunity. I’m not here to say political risk is good or bad, it’s just a factor in the emerging world. And frankly Switzerland is an ideal place to have some of that money because it’s very stable politically and we can invest globally.Specifically to your question on South Africa, the fact is that most people have pulled out (UBS, Credit Suisse, HSBC) and now you have to ask yourself why. Well,  most people don’t understand Africa, most people have a vision of what Africa is supposed to be which is completely wrong because they’ve never set foot here. I’ve been coming to SA for probably 45 years. My stepmother was from SA.
What’s your minimum investment?
A million dollars.
What are the big trends in private banking?
There was a time when we had a lot of hedge funds when interest rates were very high. In the mid-2000s we were at 30%-35% and today we’re probably 8-9%. For quite a while private equity was a black box for people and the illiquidity aspect of it was not something that they could feel comfortable with.
Over the years, it just happens that the illiquidity they quite like because it’s a lot less volatile, and so today for a family office I think 20-25% should be in private equity. We currently have about 5-6% but we’re increasing it over time. The other thing that was interesting from 2008 onwards was emerging markets.Has the emerging market story now played itself out?
If interest rates continue to creep up for a longer period of time that will be to the detriment of some emerging markets. Our view is that while rates will go up slowly we don’t see the US rate at 5% or 6%.
And let’s not forget that stock market behaviour has nothing to do with the underlying economy. If you look at Italy, it’s in a mess and the stock market is up 10% this year. What is linked, though, is the local currency. And so I think that one of the reasons SA has not done that fabulously well is because SA like other markets is dependent on foreign investors and the foreign investors have to take into consideration the exchange rate. So if it doesn’t look very good there’s a certain reluctance to invest.
Was it inevitable that you went into banking? Your family helped found Credit Suisse ...
My family comes out of the textile business, which in the 19th century was a little bit like what technology is today: huge margins, very profitable and my family was fortunate enough to do quite well. So they diversified. Both sides of my family were among the founders of Credit Suisse. Other family started the Zurich insurance company. My father was the last to hold textile companies and in the 1980s he closed the mills down and basically told us kids: do anything you want but don’t go into textiles.Has banking reformed itself after the financial crisis?
Greed is embedded in the human being, that’s just a fact and when people see (big) numbers they think part of those numbers are owed to them. So what happened is that for years people were able to reap the benefit of the upside but on the downside they just left.
I’m not saying it’s much better, but it’s going in the right direction. The question is, is there another model that works better? It’s a little bit like asking if democracy is a good political model for countries, or not. Probably for a very small minority, democracy might work, but for the vast majority of countries it does not work. The only real democracy that really works is in Switzerland. But there’s been 700 years of it.
What about SA?
SA is a very challenging situation and I think it will just take a lot of time. Of course, when you live in that period of turmoil it’s not a lot of fun. But if you put this into the perspective of history, in 80 or 100 years it’s going to be okay. But you need that 80 years of trial and error and getting heads knocked in. Look at Italy: the Romans invented bureaucracy and if you know that, you don’t wonder that everything is so complicated in Italy. Now how do you get rid of that? It’s a very slow process.