The investment performance of Swiss money managers is no longer the stuff of epic poetry. Nowhere outside the US, says Hans-Jörg von Euw of Julius Baer Asset Management in Zurich, can you find such a concentration of standardised performance measuring.
Last year, Swiss banks started introducing standards of performance measurement and presentation (SPPS), which are largely a translation of the US AIMR standards, and so are in compliance with this US model.
Although the Swiss Bankers Union (Schweizerische Bankierverenigung) only recommends and does not require their use, the leading banks in institutional asset management, including UBS and CS Group, apply them. In beauty contests for new mandates, reference to SPPS has become unavoidable.
There are some exceptions, due to technical problems or related costs. But because the market is demanding these standards, it will be only a matter of time before they will be used universally, in-cluding in external audits. Smaller banks will probably not keep pace and could be pushed out of institutional money management.
As a result, the SBU, which has to regard all its members interests, does not accelerate the pro-cess, says Martin Maurer, the bankers' delegate in the SPPS committee. On the other side, von Euw is tending to accelerate the structural process", for example, by publishing a list of those en-dorsing SPPS. He is impatient as the Swiss financial industry should be preparing for 1999, when global standards of performance measurement (GIPS) with their "enormous demands" will be introduced.
While SPPS are probably well established by now for mandates, still only a very few investment trust and listed investment companies refer to SPPS, and they are certainly the second group that should apply these standards. No major fund nor the market leaders among the KGAST-Stiftungen, or indeed the famous Visions of Martin Ebner, have an externally audited performance measurement. So rare is it that the contributions to performance of derivatives and risk and businesses with related parties uncovered.
But higher up on the third floor the air gets even thinner. Pension schemes themselves define performance quite individually. The federal law requires annual reports based upon the market values of assets; but this definition is too vague for performance and risk measurement. Because the valuation of real estate and loans to employers (in reality their credit rating), are obstacles, some pension funds disclose their returns of tradeable securities only.
Acountancy and classification of costs are major problems too, if gross or net profits of assets classes are calculated on different basis. The calculation of "Alterskapital", as the sum of the commitments of a pension fund, and even definitions of the most important items of the fund's balance sheet are not at all uniform. And when, finally, it comes to calculating the performance, it is rarely explained, how the invested capital is calculated.
These are some of the open problems on which Swiss pension funds are far away from a common understanding. But Jean-Pierre Steiner, portfolio manager of the Nestlé Switzerland pension fund, believes, that the standards of SPPS, though primarily thought to apply to specialised security portfolios, may be incorporated with a few modifications to pensions schemes, too. He is leading a study group in ASIP, the Swiss Pension Fund Association, which wants to introduce uniform performance measuring and presentation standards in pension funds. But ASIP is a volunteer fire brigade, not able to take sanctions against its members. This does not inspire much confidence, when most pension funds still keep the essential information hidden away in unaudited annexes of the annual reports, which non -specialist members of the funds are unable to read. Erich Solenthaler"