In Switzerland, pension funds continue to favour local consultants. As for the larger external consultants, there is a perception that they are having a hard time getting into the market. According to Felix Kottmann of Kottmann Advisory, Complementa, ECOFIN, Coninco, PPCMetrics and Moshen Sohrabi’s MBS have the market pretty much sewn up between themselves. “It’s very difficult to enter a quite mature market like Switzerland, particularly if you are run along an Anglo-Saxon basis,” he says.
Towards the end of last year, Felix Kottmann left Complementa after nine years to set up on his own. The reason he gave was that he was getting the impression that many clients were becoming dissatisfied with the level of service from their consultant. “In Switzerland we have far too many clients per consultant,” he says.
One of Ecofin’s managing directors Andreas Reichlin says that, given the developments in financial markets recently, the strategic situation of many pension funds has clearly deteriorated. Consequently they are seeing more interest in both ALMs and receiving more requests to review both the strategic asset allocation and its implementation. Going hand in hand with reconsidering the SAA, according to Reichlin, is talk of the risks and benefits of alternative investments. Clients are also asking for advice on rebalancing the current asset allocation to the new strategic weights.
Moshen Sohrabi, founder and head of the Geneva-based MBS Capital Advice, says the Swiss market is in many ways similar to the German market in that the local consultants still dominate. It is also similar in that there is a strong bond between clients and consultants. Sohrabi says there is no evidence that the status quo is changing and that to date there is no suggestion that large foreign consultants are making significant inroads.
This is a little unfair to the likes of Watson Wyatt, William M Mercer and Buck Heissmann. Many of the local consultants mentioned above have been advising pension funds on their investment strategies for an eternity. But many of the investment managers IPE spoke to towards the end of 2001 confirmed that the international consultants are indeed making a name for themselves and are progressively more active on the manager selection front.
Under the auspices of Beat Zaugg, the investment consulting team at Watson Wyatt has grown from four to seven and the office has doubled from 15 to 30 in the last year. Zaugg says this is due to increased demand for what he calls international consultants and he says they are picking up market share on the manager selection.
One investment manager interviewed for the annual survey of investment management in Switzerland said that as pension funds consider investing in alternative investments, so the local consultants are unable to provide the expertise to make manager selection. This seems to be borne out by the type of mandates won by Watson Wyatt.
Recently it executed a search for a commodity manager for a mid-sized Swiss pension fund. Zaugg says that there is a significant difference in terms of the assets they can throw at manager research and here he believes the local consultants are at a competitive disadvantage.
This is something he believes will remain the same in the Switzerland. “As financial markets become more and more global and more and more complex, so pension funds will go to consultants who can provide a more comprehensive service,” he says.