Bank of America partners with Eurasia Group

By Justin Baer in New York

Published: February 16 2011 22:01 | Last updated: February 16 2011 22:01

Bank of America has struck a deal with Eurasia Group to deliver the political-risk consultancy’s analysis to wealth-management clients and develop investment portfolios based on its opinion on geopolitical events.

The multiyear partnership comes after recent uprisings in Tunisia and Egypt provided many individual investors with stark reminders of how quickly localised political change can ripple through the world’s markets.

“Every day the world’s economies are growing more interdependent,” said Kunal Kamlani, BofA’s head of global investment solutions. “Geopolitical events and trends can and will have an effect on client portfolios. That trend will continue.”

Under the accord, BofA’s 20,000 Merrill Lynch and US Trust advisers will have access to Eurasia’s global research. The bank will also host conference calls with the consultancy’s analysts. Terms were not disclosed.

Eurasia will help BofA develop investment vehicles that aim to give clients exposure to more specific trends or events or hedge against the risks they pose.

“It will be a set of prepackaged portfolios that clients can buy, which will have dynamic rebalancing on asset allocation based on global events,” Mr Kamlani said.

New regulations and higher capital requirements have forced large banks to move resources from riskier activities to financial services that will produce higher returns.

Few businesses are able to adhere to the new rules while at the same time managing the investments of wealthy individuals, which is why large institutions such as Morgan Stanley and Goldman Sachs have taken steps to bulk up their offerings.

Indeed, BofA bought Merrill at the height of the crisis in part to add one of Wall Street’s largest retail brokerages.

Founded in 1998, Eurasia employs about 100 analysts and 500 local experts.

Surging food prices in the Middle East and north Africa helped stoke tensions that last month toppled Tunisian President Zein al-Abidine Ben Ali. This month, protests in Egypt brought an end to President Hosni Mubarak’s three decades in power.

Oil, copper and other commodities rose amid concerns the turmoil would disrupt supplies. Investors responded by pulling billions of dollars from emerging-markets stock funds.

“We would not have predicted a fruit vendor in Tunisia would immolate himself, but it was very clear after the financial crisis the underlying stability of emerging markets … are increasingly very differentiated,” said Ian Bremmer, Eurasia’s president. “If we’ve learnt anything from the financial crisis, it’s that the state is back.”