Swiss pension funds are facing a narrowing range of global custody, consulting and asset management services as UBS strengthens its grip on the market following its 2023 takeover of Credit Suisse.
The provision of global custody services to pension funds is shrinking, according to an analysis by BAK consultancy conducted on behalf of the Swiss State Secretariat for Economic Affairs (SECO).
BAK surveyed pension funds as bank clients on fees, quality and availability across services, including passive and active asset management mandates, fund management, real estate and strategic consulting.
High fixed costs are the biggest barrier to new banks entering the market to offer global custody and passive asset management services. Around three-quarters of pension funds surveyed expect this to have a massive or severe impact, the study found.
Half of pension funds also report that the number of banks offering passive asset management mandates has declined since the collapse of Credit Suisse.
Switching global custody or fund management banks typically leads to higher costs for pension funds, while fee differences remain relatively moderate in passive asset management and Swiss real estate mandates.
Some pension funds also observe a deterioration in strategic consulting and in services related to interest rate hedging provided by banks, according to the study.
In asset management, the collapse of Credit Suisse has increased concentration in listed real estate funds at UBS, according to PPCmetrics chief executive officer Stephan Skaanes.
“Initially, there was less competition for passive products, but several new providers have since entered the market, and competition has returned. In particular, we see that the price level, especially for indexed products, remains very competitive in Switzerland,” he said.
Overall, the loss of a provider reduces choice for pension funds, but there are still enough professional providers – both Swiss and international – in global custody and fund administration to sustain competition, Skaanes added.
So far, however, international providers have not fully capitalised on the collapse of Credit Suisse to increase their Swiss market share.
“Rather, existing providers are expanding their product ranges,” he continued.
PPCmetrics also noted that since Credit Suisse’s downfall, pension funds have reviewed existing relationships and re-tendered mandates. “This may, but does not necessarily always lead to a change of provider,” Skaanes said.
UBS reinforces position
UBS is now the only globally active major bank headquartered in Switzerland, and its position has strengthened further.
The bank tops the ranking of pension asset managers in Switzerland with €375bn in assets, followed by Zürcher Kantonalbank with €234.18bn and, at a distance, Swiss Life Asset Management with €60.44bn, according to the latest IPE Swiss institutional market survey.
UBS Asset Management is the clear market leader following its acquisition of Credit Suisse and the onboarding of Credit Suisse’s institutional clients, according to IPE.
Most pension funds established a new banking relationship solely with UBS after the takeover. As a result, 93% of pension funds previously linked to Credit Suisse are now working with UBS for global custody, according to BAK’s analysis.
Their negotiating position has weakened, particularly in passive asset management and Swiss real estate mandates, while cantonal and foreign banks are seeking to compete with UBS in active asset management by offering pension funds more favourable contractual terms, the analysis found.
