The Swiss fend off gloom as fund inflows grow

The storms gathering over the eurozone may well cast shadows over the Swiss cantons, but local institutions are successfully navigating the turbulence.

Swiss asset managers do not want to be seen to be too pleased. In these times, who can complain of a strengthening currency and swelling fund flows? Besides, hazards remain, with Swiss exporters taking the strain of the rocketing franc, the growing challenge of co-ordinated monetary policy, and the effect of waves of financial regulation.

Fund buyers at InvestmentEurope’s Geneva Forum were intensely interested in trends emerging in neighbouring European markets. As Ed Moisson, head of UKI and Cross Border Research at Lipper noted, cross-border fund management groups are increasingly looking to sell into Switzerland. “Despite the economic environment, there is money waiting to move to long-term investment. You can expect more fund managers to come knocking on your door,” he said.

According to Lipper data, Switzerland’s strong bond-investing culture is opening up to equities. And, like the UK market, there is renewed interest in Absolute Return funds, even though many of these had “taken a hammering” this year. Swiss domestic fund sales are also growing rapidly.

Lipper tracks some 35,000 European funds, of which 9,000 are truly cross border, Moisson said. Overall, cross-border activity has plunged since 2010, but it is still in positive territory, against domestic fund flows, which overall are not. The shift to cross-border investing in Europe is part of a ten-year trend that has seen domestic flows ease from 80% of total fund flows to just under 60%.

By asset class, bonds took over from equities this year. Notably, larger funds attracted more money: the top 13 equity funds from the universe measured took almost as much as the bottom 4,000 funds put together. Demand is greatest for emerging market, global and US high-yield bond funds, and Lipper data indicates that there is still investor appetite for risk in bond and alternative funds, at the expense of equity holdings.

Success Stories

Among equity funds, index trackers and exchange traded funds did best through 2011, with substantial losses associated with actively managed strategies. Among ETFs, demand soared for German and US funds. Among actively managed funds, it was emerging market and global funds.

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