The merger of the asset management divisions of UBS and Credit Suisse could bring upheaval to the Swiss fund market, reinforcing a consolidation process and leading to a rethink by clients on sourcing services.

The Asset Management Association Switzerland (AMAS) has so far not seen new players coming in to grab shares of the Swiss market, or asset managers readjusting their strategies, or approach, in light of the recent merger.

“So far, we haven’t seen any new players on the Swiss market, [but] the Credit Suisse crisis had already led to movements in the Swiss fund market in the fourth quarter of 2022, and in the first quarter of 2023,” Adrian Schatzmann, AMAS’s managing director, told IPE.

“This confirms our forecast: [with] a merger, and [if] clients want to maintain their diversification, there may be shifts coming in the market share held by asset managers,” he added.

UBS expects to complete the acquisition of Credit Suisse, brokered by Swiss authorities to avert a collapse of the bank, as early as 12 June, it said yesterday in a statement.

Credit Suisse’s shares will be delisted from the SIX Swiss Exchange and the New York Stock Exchange (NYSE), the banks announced.

The European Commission has given the unconditional approval to the acquisition, noting that overlapping activities in wealth and asset management, and investment banking in the European Economic Area (EEA) would not “significantly reduce” competition.

Still, uncertainties could represent a risk for the merger of the asset management divisions of both banks.

“On the one hand, the uncertainty concerns the continuity of the products and the offer, but on the other hand there are also uncertainties in the area of personnel and in relation to the dominant market position to which the merger will lead in certain market segments,” Philipp Weber, head of investment consulting at Mercer Switzerland, told IPE.

The unpredictable progress of the merger could lead to channelling resources away from the day-to-day business, Weber added: “Due to such uncertainties, many investors feel compelled to review their business relationship with Credit Suisse. A review is generally also indicated for customers of other institutions as the situation in the market changes.”

UBS’s chief executive officer Sergio Ermotti made clear last week at an event organised by AMAS in Bern that “synergies is part of the story”, and the new entity won’t be able to create short-term job opportunities for everybody.

“We need to take a serious look at the cost base of the standalone and combined organisations and create a sustainable outcome. It will be painful,” he added.

Consolidation under way

AMAS believes the Swiss market will likely continue to be characterised by a large number of national and international players. But at the same time, a consolidation process is under way. According to Swiss Fund Data, the new UBS-Credit Suisse organisation will reach a market share of around 40% in the fund business in Switzerland.

With the takeover of Credit Suisse by UBS, the structure of the market in terms of fund providers will change “significantly”, according to AMAS, with Credit Suisse’s market share at 13.9%, which has already declined at the benefit of UBS (25.8%); Swisscanto holds 10.1%, Blackrock 7.6% and Pictet 5.6%.

“We do not think that competition in the institutional investment sector will decrease. The Swiss asset management market is highly competitive, especially in the area of pension funds. The new situation will not change that. If customers now want to consider additional providers for reasons of diversification, foreign asset managers could increasingly use this as an opportunity,” Schatzmann said.

In principle, however, AMAS welcomed the fact that a possible merger would result in a solution to a challenging situation involving Swiss players that would preserve the integrity of the Swiss financial market.

Synergies and conflicting approaches

UBS’s Ermotti said the banks will be number 10 in the ranking of the largest global asset managers, noting that the merger is important for Switzerland to maintain its international competitiveness.

UBS has not provided information on how it plans to proceed with regard to integration.

“It is conceivable, for example, that the index product range will be merged. Credit Suisse is a very strong [player] in index funds for institutional investors, while UBS is one of the leading ETF providers in Europe. By merging the two platforms, UBS could benefit from the critical size effect,” Mercer’s Weber said.

Conflicting approaches could emerge in the definition of their active management strategies.

“Managers with very large assets to be invested can no longer only concentrate on the stocks with the best chances, but are forced to invest in a broader universe due to the available liquidity, which also includes stocks with lower chances of success,” Weber said.

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