New Swiss focus on asset management
In recent weeks, both the Swiss Funds Association (SFA) and the Swiss Banking Association (SBA) have announced a new focus on the asset management sector.
The Swiss Funds Association, which celebrated its 20th anniversary last year, is to change its name to the Swiss Funds and Asset Management Association, SFAMA, effective from 1 July 2013, while the Swiss Bankers Association has declared its intention to develop Basel as a “leading location for asset management”.
“In order to ensure that the required work progresses quickly, Peter W. Grünblatt has been appointed Head of the Asset Management Initiative at the Swiss Bankers Association,” an SBA statement said.
The SFA decision was taken at the latest annual general meeting. President Martin Thommen said it expresses key strategic objectives, with asset management an “utmost priority” in addition to a traditional focus on the funds and collective investment schemes business.
Since 2011 the SFA has concentrated on Implementing partial revision of the Collective Investment Schemes Act (CISA), stepping up lobbying on regulatory matters and expanding its function as a platform for members and the public.
Following the partial revision of the Collective Investment Schemes Act (CISA) and the setting up of the Swiss Key Investor Information Document (KIID) in 2011, both supported by the SFA, the focus turned to the Directives on Alternative Investment Fund Managers (AIFM) and Undertakings for Collective Investment in Transferable Securities (Ucits) as well as the Foreign Account Tax Act (FATCA).
SFA CEO Matthäus Den Otte said the overall strategy is to continue to develop the Swiss Asset Management sector, concentrating lobbying on forthcoming legislation such as the Swiss Financial Services Act.
The Basel-based Swiss Bankers Association, meanwhile, says asset management will be developed further over the medium term “to build an additional cornerstone of the Swiss financial centre”.
A working paper defines action areas which should gradually improve the framework for asset management over coming years. “In relation to the Asset Management Initiative, the various issues are being divided into individual projects. Further important steps include communication with and involving all interest groups as well as politicians and public authorities,” the SBA said.
Grünblatt has been picked to oversee the transition. He previously held management positions within the Credit Suisse Group from 2001 and at its subsidiaries Bank Leu and later Clariden Leu.
Switzerland’s banking industry, worth some SWF2.5trn, represents more than 350 banking institutions but with global regulatory and other pressures, consolidation is considered inevitable.
While the economy and the currency remain strong, Swiss banks have been one of the biggest targets of co-ordinated government action to greater transparency and accountability.
According to a report from data and services provider SNL, Swiss private banks are battling global competition and business pressures, while a study of 100 Swiss banks excluding international players UBS and Credit Suisse by KPMG and the University of St. Gallen shows profitability is decreasing.
Return on equity declined steadily between 2006 and 2011 to an average of 3.8% from 13.9%. During this period, profit at 78% of the Swiss banks studied dropped by at least 10%. But rather than exiting the country, assets have moved to larger institutions more able to absorb cost pressures.
Analysts in both the asset management and banking sectors acknowledge that recent international tax agreements are pressuring both clients and banks. There were some 148 institutions in private banking at the end of 2012, compared with 169 at the end of 2008, according to the KPMG study.
Regulatory changes will force those remaining Swiss banks still offering a “fiscal refuge” to compete on equal terms in the global asset management marketplace while dealing with the implications of detailed and non-optional legislation like FATCA from the US.
So far-reaching is that legislation that Swiss financial institutions may review the outsourcing of fund management as a potential source of compliance risk. Last year Hans-Joachim Jaeger, a Swiss tax expert and partner at Ernst & Young, told InvestmentEurope: “Banks will be reluctant to have external asset managers because they will be liable anyway. This does not mean necessarily that all banks will take asset management in-house, but that they are likely to make changes [to their current arrangements].”
That kind of analysis may partly explain the new focus on asset management by the banking and asset management trade organisations. The drive for transparency and the loss of banking secrecy is making many clients more demanding of their wealth managers. Optimists say that is an opportunity for the industry.