LONDON HSBC Private Bank is recommending weightings of 1-5 percent in nuclear power to clients without ethical objections, as subsidy-dependent renewable energy stocks are too exposed to political risk.
Fredrik Nerbrand, head of global strategy at HSBC's private banking arm, said nuclear power was the "only sustainable" means of electricity generation.
"We are buying nuclear energy in all its forms," he said, adding he did not favour sectors such as solar energy on account of their dependence on government subsidies at a time when state budgets are stretched, rendering them exposed to political risk.
Nerbrand also has reservations about gold, which has returned more than 21 percent this year to trade above $1,000 an ounce.
"I fail to see the long-term value of gold from an investment perspective," he said, adding the commodity should be viewed as a hedge against downside risk to dollar-denominated investments.
Nerbrand is advising wealthy clients that the recovery in the world economy is gathering momentum and the time is right to move into "riskier assets" such as corporate credit, hedge funds and emerging markets.
But he remains particular about which emerging markets are worth a punt, favouring China and Brazil over Russia, which is beset with political risk, and India, which he says has overheated.
"Russia is basically related to oil and I'd rather just buy oil," he said.
The risk of rising consumer prices in the medium term is low because high unemployment rules out a wage-price spiral, but money printing by governments is likely to lead to higher asset prices favouring real estate and commodities, he said.
In contrast, liquid assets and cash are expected to underperform with central banks maintaining interest rates at record lows. "Central banks will talk tough but act soft with regards to inflation," he said.
(Editing by Dan Lalor)