Acting to save national interests
The Swiss Funds Association has criticised aspects of Switzerland’s proposed Collective Investment Schemes Act, saying it discriminates against the country’s financial sector and lacks measures to strengthen competitiveness.
On 2 March, Switzerland’s Federal Council published its proposal regarding a partial revision of the Collective Investment Schemes Act (CISA). But the Swiss Funds Association (SFA), which covers more than 95% of funds distributed in Switzerland, concluded that this achieves only certain objectives.
It urged “improvements” to the proposal to prevent the loss of jobs and the migration of entire product categories.
The main charge from the SFA is that many of the CISA provisions go beyond EU standards, or create specific Swiss features where there are no international standards.
On distribution regulations and the liability requirements for custodian banks, the draft overshoots the target in many respects.
It says there are “no proposals whatsoever” for strengthening competitiveness in the value chain segments of asset management, administration and distribution of collective investment schemes, despite the fact that these were specifically covered in the Federal Council’s report on strategic directions for Switzerland’s financial market policy.
The SFA, led by CEO Mattheus den Otter, warns: “We face major challenges in private banking and investment banking. In this difficult situation for the Swiss financial sector, asset management can be an important third mainstay. The partial revision of the CISA is therefore of great importance, and we must not make any mistakes here.”
Martin Thommen, president of the SFA, says: “We have lost key parts of the fund business to other countries once before. We do not want to see this happen again with regard to investors, asset management and funds for qualified investors, or in the case of distribution. We will be working together with the Swiss Bankers Association in this matter.”
The SFA has welcomed the new provisions on management and custody. But the proposal contains new, discriminatory provisions on the distribution of collective investment schemes in or from Switzerland.
These proposed regulations impair Swiss asset managers in institutional fund distribution by imposing a “globally applicable standard” of unprecedented strictness.
“Global fund distribution should not be constrained in an EU straightjacket,” says Den Otter. The competitiveness of Switzerland as a production location for collective investment schemes must be improved if it is to hold its own in the pan-European market.
Corresponding proposals submitted by the SFA in the consultation process have not been adopted by the Federal Council. The key facets for the SFA are as follows:
• Expanding the scope with regard to single investors/possibility of delegating asset management to single investors
• Expanding permissible investments for Swiss limited partnerships for collective Investments
• Proposals for the better functioning of investment companies with variable capital (Sicavs), and
• Expanding the permitted investments in the case of real estate funds.
The SFA said that without these improvements, major asset managers will cut jobs in distribution in Switzerland, rendering the country unattractive for foreign asset managers.
The volume of Swiss qualified investor funds – at CHF317bn at the end of 2011 – will stagnate and migrate abroad over the long term, with the likelihood of the range of funds on offer for Swiss institutions being “slashed”.
The CISA proposal comes shortly after the SFA, through its associate firm Swiss Fund Data AG, recorded increased month-on-month inflows in February. The total volume of assets in investment funds stood at CHF654.6bn, an increase of CHF14.5bn month-on-month. Funds for institutional investors accounted for some CHF243.6nn of this.
Den Otter said the total fund volumes figure was “well on the way to returning to the high set last year at CHF670bn, provided that the brighter mood on the capital markets prevails”.
Equity funds have been able to recoup the losses suffered from outflows last year. In comparison, the figures for the major indices were +2.5%, +4.1% and +2.3% for Dow Jones, S&P 500 and SMI respectively. The euro gained about 0.1% against the Swiss franc, while there was a drop of -1.6% in the case of the dollar.
Equity and bond funds accounted for nearly all of the net inflows of CHF1.9bn in February, and with a market share of 32% each, make up two-thirds of the overall market.