Top 400 Asset Managers: Swiss work on their kerb appeal
Peter Grünblatt asks whether recent measures in Switzerland – known primarily for private money – can raise its profile and appeal as a centre of asset management
Asset management is already an important mainstay of the Swiss financial sector. As
of end-2012, assets under management in Switzerland amounted to approximately CHF2.5trn (€2trn), of which around CHF1.5trn were assets managed for institutional clients (excluding direct investments in real estate and cash). Assets totalling over CHF450bn are allocated to investment funds managed in Switzerland.
Despite the considerable size of institutional assets, Switzerland is still primarily associated with private banking and wealth management. Asset management as a function in its own right has in the past not received the recognition it actually deserves.
In order to bring asset management forward, the Swiss Bankers Association (SBA), together with the Swiss Funds Association (SFA), published a white paper in December 2012 outlining areas for action to position Switzerland as a leading and globally recognised centre for asset management. The ambitious vision developed by the two associations consists in shaping Swiss asset management so that it becomes synonymous with the highest level of reliability, independence and quality, and becomes known and recognised for these characteristics around the world.
In the coming months and years targeted measures will be implemented to increase the appeal of Switzerland as a centre for asset management. Some important prerequisites, however, are already in place. Switzerland has a robust and healthy economy. The country is characterised by political stability and cultural openness. It has an attractive and reliable tax regime and an important domestic market in terms of assets under management, and domestic financial and capital markets. Switzerland also enjoys an excellent infrastructure and has a highly-skilled workforce. These advantages are complemented by a high quality of living.
However, in order for Switzerland to become a globally recognised centre for asset management, action is required in the following areas:
• Swiss asset management must be positioned as a unique brand;
• Recognised asset management standards must be created;
• Adequate supervision must be established;
• Market access must be improved;
• The tax environment must be optimised.
• Further investments in infrastructure as well as education are required;
• Adequate investment structures and vehicles must be put into place.
These points of action are being discussed by stakeholders such as insurance companies, fund managers, pension funds and foreign asset managers. It is vital to the initiative that as many perspectives as possible be taken into consideration to further develop asset management in Switzerland.
The initiative grants highest priority to asset management standards and adequate supervision; these two areas will be the first to contribute to the evolution of the initiative.
Development of regulation
At present, asset management is not subject to a dedicated law. Instead, it is governed by various regulations such as the Banking Act, the Swiss Collective Investment Scheme Act, pension fund regulations, and so on.
Asset management in Switzerland is mainly regulated in terms of products and services, but not as an activity itself. Comprehensive regulations dedicated to this end are necessary, regardless of whether they apply to banks, investment fund management companies, insurance companies, pension funds, or asset management companies run as independent operations. These regulations should function efficiently and provide for an appropriate degree of transparency. They need to be internationally recognised, but based on Swiss law and professional standards of conduct.
Today, there is still a certain lack of regulation of processes and best practices; Switzerland will therefore need to adopt internationally accepted standards. Other countries regulate corporate governance, best practices and business ethics in a more comprehensive manner. Compatibility with regulatory requirements in other countries therefore means either complying with foreign standards or developing the equivalent in Switzerland.
Additionally, greater co-operation with the supervisory authorities in other countries must be striven for in governance, best practice and a code of ethics, with the aim of setting and maintaining agreements for the international recognition of Swiss standards, as well as ensuring market access for asset managers based in Switzerland.
Supervision shares the same importance as the setting of norms and standards. The initiative calls for a supervisory body with a dedicated asset management unit. Such a specialised team should not only oversee asset management activities, but also ensure a competitive supervisory environment on a global level, both for Swiss and foreign asset managers offering their services in Switzerland.
Furthermore, the supervisory bodies need a further development of abilities and capacity, given the often complex nature of asset management issues. Otherwise, supervisory activities run the risk of only providing fragmented control.
Infrastructure and education
To support the future growth of the asset management industry, it will be important to address infrastructure issues, such as transparent and efficient access to stock exchanges and markets as well as to downstream securities services. Furthermore, if Switzerland wishes to continue to attract the most talented asset managers, dedicated service centres supporting these specialists on issues such as housing, schooling, work permits and administrative issues will have to be developed. The efforts planned in academic education and asset management research are long term.
While Switzerland’s location is advantageous, and the most important disadvantages are being addressed, it should also be understood that a brand with a global reach is not created overnight. The ‘asset management Switzerland’ brand has to be clearly defined and it must promise services that can actually be delivered. The value proposition must be so attractive that clients will choose to rely on a Swiss-based asset manager and providers will want their factory – their asset management business – in Switzerland.
The financial services industry is able to implement the majority of the measures outlined above on its own. Some of the areas for action, however, have to be tackled together with regulators and policymakers. The prerequisite, a broad consensus among political and supervisory authorities and the industry, is in place. The initiative, therefore, has a good starting position from which to further develop asset management in Switzerland.
Peter Grünblatt is head of the asset management initiative at the Swiss Bankers Association