International private banking specialists are increasingly nudging their high-net worth clients into hedge funds and away from the struggling stock markets.

Customers of JP Morgan Global Private Bank and Coutts have been transferring large amounts of money into these funds. JP Morgan is advising clients to buy hedge funds that offer absolute returns regardless of market direction.

Mr Daniel de Fernando, chief investment officer for Europe, Middle East and Africa, says it has been advising clients to make very gentle adjustments to portfolio allocations over the past three or four months by lowering their exposure to stocks gradually and adding alternative investments. Hedge funds are lightly regulated investment pools that use sophisticated investment strategies to try to produce absolute gains, regardless of the direction of markets, thus enabling high net worth clients to preserve their wealth. The bank told wealthy clients to hold between 10 and 20 per cent of their portfolios in hedge funds.