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Asset Management

Asset Management

Asset management is a growth business. To ensure that the Swiss financial centre is able to benefit from this growth, the Swiss Bankers Association (SBA) and the Swiss Funds & Asset Management Association (SFAMA) established the Asset Management Platform Switzerland. It carries on the work previously conducted by the Asset Management Initiative, which was launched in 2012. The objective is to make Switzerland a leading location for asset management.

Asset management in Switzerland is to be developed into a key pillar of the Swiss financial centre, and Swiss asset management is to stand internationally for a high level of reliability, independence and quality. The Asset Management Platform Switzerland will serve to strengthen asset management in Switzerland. In consequence, the Swiss financial centre will be more broadly diversified, existing lines of business will be complemented and areas of business that are declining will be compensated for. In addition to the private client business and client-focussed investment banking, asset management will thus become a further supporting pillar of the financial centre. 

Pensions: a focal point for the Asset Management Platform Switzerland

Pension plans concern society as a whole, and Swiss pension funds will be the greatest demanders for asset management services in the coming years. The banks together with international providers are the biggest asset managers in Switzerland. The banks can and want to make a contribution to pension funds and therefore to society. It is against this backdrop that the “Occupational Pension Plans” task force of the Asset Management Steering Committee and the Asset Management Platform Switzerland conducted a study that highlights the opportunities for optimising pension fund asset allocation.

In the past, pension funds could count on the so-called 3rd contributor: the investment returns generated on the capital markets accounted for over one-third of the contribution to pension assets. In today’s capital market environment, however, it is difficult for the Swiss pension funds to uphold this level. If asset allocation were optimised, it would be possible to generate higher returns with the same level of risk. The study “The 3rd contributor to occupational pension plans – Proposals for optimisation” shows how this can be achieved:

Demystification

Pension funds must utilise the existing room for manoeuvre. To this end, reservations about non-traditional investments to be dispelled – a demystification must take place. A portfolio that has been optimised using non-traditional investments can generate additional returns of 0.7 % compared to a standard pension fund portfolio today.

Recategorisation (or reconfiguration) and greater flexibility

The rules of the game should be relaxed. In order for the potential of pension fund portfolios to be utilised, flexible investment guidelines and thus a revision of the OOB2 Ordinance is required.

Prudent Investor Rule

Pension funds should be regulated in accordance with the Prudent Investor Rule. This concept is already standard in many countries, and dictates that pension funds manage assets as a prudent investor, or in other words, manage assets as if they were their own. This would give pension funds significantly greater responsibility, but also more room for manoeuvre when making investment decisions.

The study was presented to the public in February 2017. It provides important proposals for performance-orientated asset allocation by pension funds. Concrete changes must, however, be undertaken by pension funds and the government, and responsibility is therefore shared by all stakeholders in government and asset management.

The Asset Management Platform Switzerland: key areas of focus

The platform aims to substantially improve the framework conditions for asset management in Switzerland, making the country a more attractive location for asset management. The plans include:

  • Improving the regulatory environment and creating competitive framework conditions: Swiss asset managers must be able to provide their products and services competitively out of Switzerland to other countries, as significant growth is forecast for institutional assets abroad. The focus therefore lies clearly on the exportability of services and products out of Switzerland.
  • Bringing new asset managers to Switzerland and promoting entrepreneurship: the platform aims to encourage new asset managers to move to Switzerland and support innovative asset management ideas in Switzerland. This will result in a rise in the number of jobs in Switzerland and significant growth of the market. These efforts are currently being hindered, however, by developments in Switzerland. For example, the mass immigration initiative, the implementation of which is still unclear, is decreasing legal certainty and complicates a potential decision by foreign asset managers to move to Switzerland.
  • Increasing the share of value creation of existing asset managers in Switzerland: this is to be achieved, for example, by bringing parts of the value added chain that are currently conducted abroad to Switzerland. Again, however, the platform faces challenges in this area due to domestic political issues.
  • Strengthening the reputation of the Swiss location: through active promotion and branding, Switzerland’s prominence as a location for asset management will be improved and will attract new business as a result.

The platform serves as a think tank for the asset management industry. It generates ideas and projects, while responsibility for the realisation and financing thereof lies with the industry itself. It is essential that the stakeholders recognise their opportunities and help to carry and support ideas. Political will, the market and the stakeholders themselves will decide how to realise the existing potential and thus, in the end also determine the success of Switzerland as a location for asset management.

Milestones reached

Important milestones have already been reached since the Asset Management Initiative was founded in 2012:

  • The Asset Management Initiative made a strong contribution to the legislative process for the Financial Services Act FinSA and Financial Institutions Act FinIA. The two draft bills aim to strengthen client protection in the financial sector and reduce distortions in competition between the various providers of financial products and services by establishing a level playing field. Further to this, the new rules aim to strengthen the international competitiveness of the Swiss financial centre. Both FinSA and FinIA are of key importance to Swiss asset management. FinIA will introduce the first specific, coherent prudential supervision for financial institutions that provide asset management services for third parties. This important change will give Swiss asset management the needed visibility at the international level. One of the key aspects of FinSA is that it will bring the information and organisational requirements for financial services providers in line with international standards. This is the only way to ensure that our financial services and products are exportable and that Swiss asset managers can effectively participate in the global growth that has been forecast for institutional assets. Because Swiss financial services and financial products are to a large extent exported to the EU, a fundamental alignment of FinSA with EU regulation is crucial, particularly also with a view to the requirement for equivalence under MiFID/MiFIR.
  • A regular exchange on strategic matters was established between the supervisory authority, FINMA, and the industry representatives. Also helpful is that the supervisory authority has increased staff in the asset management segment, and by granting it a seat on the executive board, has positioned asset management in accordance with its importance.
  • Significant progress has been made in terms of consolidating interests within the sector. In addition, thanks to continuous communication with industry representatives, an ongoing dialogue about asset management has been established and it has been possible to position the matter accordingly.
  • Educational institutions such as the Swiss Finance Institute or the Fund Academy have incorporated asset management into their programmes, also thanks to the work conducted as part of the initiative. They now have dedicated courses of study in this area. The Swiss Finance Institute (SFI), for example, offers the International Asset Management Program. This further training programme has an international focus and is designed for managers in asset management companies with a global focus. It can be completed as a CAS in Asset Management at the University of Bern. The emphasis of the programme is on matters of leadership and management in international asset management companies.
  • Drafting of the study “The 3rd contributor to occupational pension plans – Proposals for optimisation”, which was conducted by experts from member banks of the Swiss Bankers Association and the platform.
  • The platform is in the process of establishing a statistical basis for asset management in Switzerland. For example, 2016 marks the first time that comprehensive data were collected relating to the assets under management by Swiss asset managers. In addition to the approximately 1,050 billion CHF managed through collective investment schemes, around 1,240 billion CHF are invested in mandates held by Swiss asset managers. Switzerland is therefore the fourth largest location for asset management in Europe.
  • Particular attention is being paid to establishing and embedding asset management as a stand-alone discipline within financial services. Targeted measures are planned that build on this and aim to promote the reputation of Swiss asset management and Switzerland as a location for asset management both at home and abroad.
  • Another key area of focus is the active monitoring and support for seminal issues such as digitalisation in asset management and the targeted promotion of innovative start-ups in asset management.

Asset Management Platform Switzerland: representative body

The platform, which was founded in 2016 by the Swiss Bankers Association (SBA) and the Swiss Funds & Asset Management Association (SFAMA), is represented by further associations such as the Swiss Insurance Association, the Swiss Pension Fund Association and the Conference of Managers of Investment Foundations. The SBA is responsible for the strategic leadership of the platform, while SFAMA is responsible for operational management.