Winterthur is a major insurer and investor in global terms. We have SFr115bn ($76.7bn) in assets under management," points out Erwin Heri, the group's chief in-vestment officer and former economics professor.

Based in Winterthur, at one remove from Zurich, he casts an independent and not always warm eye on the local investment scene.

Even though over half of the group's assets were invested outside Switzerland, the domestic assets are as huge. "We must be one of the biggest stock market investors in Switzerland.

"Looking at the equity side, we have an almost index type portfolio due to its sheer size," says Heri. Part of the SFr40bn portfolio is on formal indexed basis through mandates with group company Credit Suisse Asset Management. "Where we take the decision to index, it is done through a mandate rather than a structured product."

Heri says that the proportion of the portfolio explicitly indexed comes to around 20%. "But if you take the view that most of your portfolio is indexed anyway since its correlation to the index and its Beta are almost one, then I would say the character of our portfolio is 70% indexed and 30% active." The portfolio has almost index weightings in the big stocks such as Novartis, Roche and Nestlé, because of liquidity reasons.

For the external active managers Witherthur uses, indexation is always lurking in the wings. "It is our cheapest option," says Heri. "Our performance is fundamentally made by strategic asset allocation. The index is the benchmark and if the manager is systematically below the index over a period of three to five years, then they lose the mandate. And most of the managers do lose."

But despite protestations that they are not stockpickers, Heri and his team have an active programme of looking at selected companies in the index and doing its own in-depth research into them, including company visits. "If we like a company, then we buy it big time, on a purely buy and hold basis. If we have chosen to invest in a company we go for it and then we stick with it." The philosophy is that if the right companies are chosen, they will out perform the index longer term. Winterthur may become so committed to companies it likes that it takes a seat on the board and with some smaller companies can act as financial adviser.

The nature of the Swiss bond market is that it is very much a buy and hold scenario since there is no liquidity in the market. With the group's enormous liabilities in Swiss francs, the domestic portfolio is huge. "If we tried to sell our bonds we would make the interest rate in Switzerland," he says. "We are simply too big for the market, which is why we diversified and now 35% of the bond portfolio is international. We are really looking forward to the euro as that will give us the liquidity we need to really run a sophisticated modern fixed income management approach."

In addition to being a customer of the asset management industry, Winterthur is, of course a competitor, in that it offers investment and administration services to pension funds, through a full pension product. "We also provide asset management services to pension funds through a small boutique asset manager called Winterthur Financial Services. We do not market this company aggressively, but there are pension funds who say to us: 'You run so much money and you do that well, why don't you take some of our assets'. This money is run according to our asset allocation strategy here." Fennell Betson"