asset & wealth management in · pdf file3 dear reader, accelerando associates has...
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11
Asset & Wealth Management
in Switzerland
March 2017
Sample pages
2
3
Dear Reader,
accelerando associates has published annual reports on the Swiss asset management market and fund distribution in Switzerland for a number of years now.
In 2016, we joined forces with PwC’s Market Research Centre in Luxembourg to set new standards in terms of asset management and fund distribution country reports. Our joint forces will ensure thorough, complete and highly practice-relevant intelligence for asset managers worldwide.
The Swiss asset & wealth landscape has experienced substantial changes in recent years. Our senior sales and Swiss investor surveys provide strong evidence on how challenging fund distribution in Switzerland has become. Nevertheless, the country remains one of the largest asset management and fund distribution markets in Europe, with very high professional investor sophistication.
The challenging investment environment and a number of Swiss specific events, however, provide major business opportunities for international asset managers aiming for Swiss assets.
I trust that you’ll find valuable insights in this report and you’ll enjoy the read.
Dear Reader,
The PwC Market Research Centre is proud to release, together with accelerando associates, its second Asset & Wealth Management country report.
Our country reports are a must-have for Asset & Wealth managers considering opportunities in a particular country or trying to understand the latest asset management trends, investor appetite for various asset classes, ease of market entry, level of competition and distribution channels.
Switzerland continues to be an attractive wealth management location, with many benefits such as economic and political stability. As regulatory changes are transforming its landscape more and more international asset managers are entering the market while ensuring at the same time investor’s protection. The private banking sector, which traditionally has been the largest distribution channel of investment funds, is undergoing major changes. However, despite the changes, it is still the world’s number one leader in terms of cross border wealth management.
With this report, we aim to guide asset managers in their Switzerland-facing business development strategies.
Philip Kalus Founder & Managing Partner, accelerando associates
Dariush Yazdani Partner and Leader, PwC Market Research Centre
Jean-Sébastien LassondePartner and Leader, PwC Switzerland Asset Management & Real Estate
Table of content
Foreword 4
Executive summary 6
Introduction 10
Macroeconomic overview Figure 1: Key economic indicators, page 11 Figure 2: Evolution of macroeconomic variables of interest, page 12
Asset management market Figure 3: Development of assets domiciled in Switzerland (CHF bn), page 13 Figure 4: Evolution of the number of foreign domiciled funds distributed in Switzerland, page 13 Figure5:Keyassetmanagementfigures,page14
Asset management dynamics
1 The Swiss asset management market landscape 16
Overview of the European asset management market Figure 6: Net assets of UCITS and AIFs in Europe (EUR bn), page 17 Figure 7: Net sales of UCITS and AIFs in Europe (EUR bn), page 17
Overview of the Swiss asset management market Figure 8: Evolution of open-ended domestic funds in Switzerland (CHF bn), page 18 Figure 9: Assets of investment funds sold in Switzerland (CHF bn, December 2016), page 19 Figure 10: Assets sold in Switzerland by client type (December 2016), page 19 Figure 11: Asset type of funds sold in Switzerland (December 2016), page 19
Overview of foreign assets Figure 12: Origin of foreign fund registrations in Switzerland, page 20 Figure 13: Evolution of the number of foreign domiciled funds distributed in Switzerland, page 20
Main players Figure 14: Autorisation of new asset managers and total number of asset managers registered with FINMA, page 21 Figure 15: Top 10 promoters by AuM and market share of funds distributed (December, 2016), page 21
Asset class snapshots Figure 16: ETF by asset class (December 2016), page 22 Figure 17: ETF turnover and number of ETFs on SIX Swiss Exchange (CHF bn, 2016), page 22 Figure 18: Main players in terms of AuM and their net sales (CHF bn), page 23 Figure 19: Development of AuM of ETFs listed at SIX (CHF bn, December 2016), page 23 Figure 20: Development of net sales of ETFs listed at SIX (CHF bn, December 2016), page 23 Figure 21: Evolution of assets of real estate funds (CHF bn), page 24 Figure 22: SFA yield on investment indicator for real estate funds, page 24 Figure 23: Development of investments in ESG (CHF bn), page 25
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2 Distribution trends 26
Distribution trends Figure 24: Fund distribution channels in Switzerland (2013), page 27 Figure 25: In which investor segment do you expect most percentage growth in fund sales in Switzerland (12 months)?, page 28 Figure 26: How would you describe fund sales in Switzerland within the last 12 months?, page 28 Figure 27: What are your expectations for Swiss fund sales for the next 12 months?, page 28 Figure 28: Information gathering & communication with fund houses: Do you use digital channels (websites, apps, etc.)?, page 29 Figure 29: How would you rate fund houses’ digital accessibility and transparency on an overall basis?, page 29 Figure 30: Do fund houses’ sales staff meet your requirements, adding value to your analysis and decision making process?, page 29 Figure 31: A lot of talk about pressure on fund fees. Has price pressure in Switzerland in reality... , page 30 Figure 32: Where do you expect major competition from?, page 30
Client service model requirements Figure 33: Wealth management in Switzerland is experiencing major corporate activity and restructuring. How has this impacted your Swiss distribution strategy?, page 31 Figure 34: What provides the major challenge in client service nowadays?, page 31
Distribution channels Figure35:Forwhichassetclasseshasyourfirmincreasedits selection/analysis capabilities (last 12 months)?, page 32 Figure 36: For which region do you have the highest expectations going forward (12 months)?, page 32 Figure 37: For which asset class do you have the highest expectations going forward (12 months)?, page 33 Figure 38: In which asset classes do you expect most sales for the next 12 months?, page 33
3 Wholesale & retail investors 34
Wholesale & retail funds Figure 39: Retail funds sold in Switzerland - AuM distribution (CHF bn, December 2016), page 35 Figure 40: Evolution of UCITS equivalent assets domiciled in Switzerland, by asset class, page 37 Figure 41: Evolution of UCITS equivalent net sales domiciled in Switzerland, by asset class, page 37
Overview of wholesale & retail distribution channels in Switzerland Figure 42: Retail distribution, page 39
Distribution channels – Banks Figure 43: Market share by category of bank (2015), page 40 Figure 44: Number of banks in Switzerland, page 41 Figure 45: Holdings of securities in bank custody accounts (CHF bn, 2015), page 41
Distribution channels – Private banking Figure 46: Number of banks in the wealth management business, page 42 Figure 47: Share of total worldwide offshore AuM in Switzerland, page 42 Figure 48: NNM growth by size of private bank, page 43 Figure 49: Development of personnel expense per CHF 1m AuM by size of private bank, page 44 Figure 50: Development of general & admin expense per CHF 1m AuM by size of private bank, page 45 Figure 51: NNM growth by size of private bank, page 46
Distribution channels – Private bankers Figure 52: Banks with private partner liability by year of inception, page 47
Distribution channels – Cantonal banks Figure 53: List of Cantonal banks (December 2015), page 48
Distribution channels – Direct banks
Distribution channels – Fund platforms & FinTech
Distribution channels – Independent wealth managers
Distribution channels – Family offices Figure54:SelectionofSwissFamilyOffices,page52 Figure 55: Percentage of adults with a net worth over USD 1 mn (2015), page 52
Distribution channels – New entrants
Distribution opportunities & challenges Figure 56: Distribution opportunities & challenges, page 54
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4 Institutional investors 56
Introduction Figure 57: Development of net assets of institutional funds sold (CHF bn), page 57 Figure 58: Development of net sales of institutional funds sold (CHF bn), page 57 Figure 59: Asset allocation of institutional funds (December 2016), page 57
The role of investments consultants Figure 60: Leading investment consultants, page 58
Overview of Swiss institutional investors Figure 61: Overview of Swiss institutional investors, page 59
Pension funds Figure 62: Three-pillar system, page 60 Figure 63: Total assets and asset allocation, page 62 Figure 64: Evolution of total assets of pension funds by asset class (CHF bn), page 62 Figure 65: Evolution of foreign investments by asset class (CHF bn), page 63 Figure 66: Largest pension funds in Switzerland, page 63
Insurance companies Figure 67: Largest European insurers (2015), page 64 Figure 68: Evolution of total assets held in Swiss insurance portfolios (CHF bn), page 64 Figure 69: Asset allocation of insurance companies’ portfolios in 2015, page 65 Figure 70: Life insurers & Non-life insurers, page 65 Figure 71: Top 6 insurance companies (by premium in CHF bn, 2015), page 66 Figure 72: Market shares of Swiss insurers (in 2015), page 66
Fund of funds Figure 73: Evolution of assets of Swiss domiciled fund of funds (CHF bn), page 67 Figure 74: Asset allocation of Swiss domiciled fund of funds (October 2016), page 67 Figure 75: Top 25 fund of funds domiciled in Switzerland (October 2016), page 68 Figure 76: Top 25 fund of funds registered for sale in Switzerland (October 2016), page 69 Figure 77: Swiss FoF management companies – aggregate FoF AuM, page 70
Foundations Figure 78: KGAST investment foundations, page 71 Figure 79: Growth of Swiss foundations, page 72
Institutional business opportunities & challenges Figure 80: Institutional business opportunities & challenges, page 73
5 Brand, conferences & media 76
Ratings & rankings Brand Conferences & media
Appendix: Swiss fund buyers methodology 80
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Executive summary
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The World Economic Forum named Switzerland the most competitive nation for an eighth straight year in September 2016. Switzerland has become synonymous with economic stability, low unemployment and broad wealth. These, together with Switzerland’s focus on innovation, are the main reasons why it remains an attractive location for international asset and wealth managers keen to tap into its significant investable wealth.
The Swiss asset and wealth management landscape has successfully surpassed challenges for a number of years now. Regulatory updates have dramatically changed the environment for international fund houses aiming for Swiss assets, bringing it more in line with international standards and providing investors with more transparency and thus protection. As a result, the Swiss wealth and asset management market has been corporatised and consolidated considerably. At the same time, several successful independent Swiss asset managers have achieved international status and significant growth in AuM.
The private banking sector continues to be interwoven with the asset management sector, with its two largest players, UBS and Credit Suisse, positioning themselves as wealth managers. Hence this reports aims to provide a view on the Swiss private banking sector as a significant source of wealth. As such, noteworthy is that almost 40 banks operating in the wealth management sector have disappeared from the Swiss banking landscape since 2011 by either being completely dissolved or by changing their corporate structure. This includes some of the oldest and most highly regarded brands, such as Bank Leu and Wegelin. Moreover, several international banks (mainly Anglo-Saxon) have exited Switzerland. And close to one third of the Swiss Private Banks posted net losses at the end of 2015, according to an article in “Neue Zürcher Zeitung” (NZZ) in October 2016.
Despite these developments, banks in Switzerland – particularly larger banks – have been able to attract net new money. Subsequently, Switzerland successfully defended its leading position in terms of cross–border client assets. This is a clear indicator, that clients choosing a bank consider factors such as political and economic stability, currency and the quality of service. All attributes that Switzerland has always managed to perfect.
Adding to its success, the Swiss retail and institutional fund market has a substantial size with numerous large fund buyers across all investor segments. The Swiss market has steadily grown in recent years crossing the threshold of CHF 900 bn to an all time high of CHF 915 bn, according to Swiss Funds & Asset Management Association (SFAMA).
Taking into account institutional discretionary mandates of CHF 1.2 tn and funds not listed with SFAMA/Swiss Fund Data but held in Swiss bank accounts, the SFAMA number doubles as shown throughout this report.
Currently, there are more than 8,700 funds managed, distributed or represented by a Swiss Financial Markets Supervisory Authority (FINMA)-authorised institution (foreign and home domiciled funds). Foreign funds restricted exclusively to qualified investors are not covered by the statistics given that these products are only placed privately and cannot receive FINMA approval, even though they may be managed by Swiss-based asset managers.
Domestic asset managers dominate the top ten fund provider leaderboard in Switzerland. Two local bank giants, UBS and Credit Suisse, have the largest market shares by having more than 40 % of the market altogether. However, foreign investment funds authorised for distribution in Switzerland by the FINMA outnumber the Swiss investment funds by 5:1. This ratio appears to have remained fairly constant over the past five years. Foreign fund providers’ market share in the Swiss market has grown steadily during this period. BlackRock takes the clear lead, with JP Morgan coming in close behind as the second largest foreign asset manager in Switzerland (based on FINMA approved fund AuM).
A closer look into the leaderboards reveals many foreign asset managers with remarkable business in Switzerland- in particular in non-captive channels - bearing in mind that Switzerland used to be one of the most best-of-breed driven markets.
This still applies, although we are seeing a broad move away from open towards more guided architecture.
The asset class composition of the Swiss market puts equity in the strong lead, with 40 %, followed by fixed income, with 31%, and multi asset, with 12 %.
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Switzerland’s neighbouring countries are quite different. In Austria, France, Germany and Italy, multi asset has been the major success story in terms of net flows and market share growth. The multi asset concept (in relative terms) has not been a high-flyer in Switzerland.
Corporate activity, mergers and acquisitions and consolidation have taken their toll. Nevertheless, Swiss banking, specifically Swiss private banking, still delivers high numbers in assets under management and the list of sizeable players remains long.
Swiss banks currently hold CHF 5,492 bn in client custody accounts and approx. 30% of these assets are invested in investment funds. Moreover, Swiss banks deliver advice on numerous accounts based outside of Switzerland, e.g. in Asia, while the respective fund selection units are based in Switzerland.
Fund houses looking to distribute funds to Swiss banks face the added challenges of registering international funds, dealing with various languages and interfacing with local sales teams and service units.
Assets in Swiss pension funds amounted to close to CHF 800 bn as of the end 2015. In spite of substantial assets in the ten pension schemes there are numerous relatively small pension funds on the market. The total amount exceeds 600 Swiss pension funds.
The negative interest rate policy imposed by the Swiss National Bank (SNB) is having a low to moderate impact on the investment decisions of Swiss pension funds. Nevertheless, exposure to fixed income has been declining continuously since 2008. It is also important to point out that the type of fixed income exposure has changed in favour of unconstrained investments. At the same time the exposure to equities has grown steadily.
Given the high domestic exposures of Swiss pensions schemes, many industry experts expect more assets to be shifted away from fixed income into higher yielding asset classes in order to meet liabilities.
When assessing the market size of Swiss fund of funds, we must consider Swiss-domiciled and non-Swiss-domiciled, as well as Swiss managed fund of funds. Fund of funds management and respective fund analysts are also in charge of fund selection for private and retail banking at many Swiss accounts – both domestically and internationally.
Fund distribution in Switzerland is never only about Switzerland – it is domestic, international, onshore and offshore.
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Main playersThe number of locally authorised asset managers has steadily increased in recent years to reach 178 in 2015. The sharp increase in the last two years can be partially explained by the fact that, with the revision of the Collective Investment Scheme Act in 2013, all CIS asset managers are subject to supervision and need to obtain a license from FINMA.
In general, the Swiss fund market is highly concentrated, with the top ten players handling more than 70% of assets sold. Furthermore, the market is dominated by players of Swiss origin. However, international asset managers such as BlackRock and JPMorgan recently have entered the “Top 10 League” in the Swiss asset management market. Together, the “Top 10” manage CHF 650 bn in assets.
Due to the fact that most of them are affiliated with large banking or insurance groups, the leading fund manager groups in Switzerland have very important international operations. UBS ranks 13th and Credit Suisse 45th worldwide in terms of assets under management. Both banks are also the major national players transmitting funds for distribution using a domiciliation other than Switzerland.
Foreign fund providers’ share of the Swiss market has grown steadily over the past five years and, with it, the market share of foreign fund providers keeps growing. BlackRock has carved out a strong position and managed CHF 48 bn in assets as of December 2016. JP Morgan is the second largest foreign asset manager in Switzerland.
Authorisation of new Asset Managers and total number of asset managers registered with FINMA
Top 10 promoters by AuM and market share of funds distributed (December 2016)
0
50
100
150
200
70
1915
7 920
3827
8390
99
119
151
178
2009 2010 2011 2012 2013 2014 2015
Number of Asset Managers of CIS Newly authorised asset managers of CIS
Rank Asset Manager AuM* (CHF bn)
Market share
1 UBS 233 26%
2 Credit Suisse 145 16%
3 Swisscanto 83 9%
4 Pictet 51 6%
5 BlackRock 48 5%
6 GAM 28 3%
7 Lombard Odier 21 2%
8 JPMorgan 15 2%
9 Zurich 13 1%
10 Vontobel 13 1%
Source: Swiss Fund & Asset Management Association, Tower Watson, Ignites Europe
* only FINMA authorised domestic and foreign Funds net assets
1313
50%
33%
17%
Very good
Not good enough
Good, but room to improve
33%
67%
Mixed, not on a broad basis
Yes, absolutely
67%
33%
Yes, but not broadly yet
Yes, a lot
Distribution trends Senior fund selector sentimentA clear majority of Swiss fund selectors interviewed in October 2016 use digital channels like websites and apps for information gathering and communication with fund houses. This represents a sharp increase over respective findings in recent years. Moreover, professional Swiss fund buyers are using third party fund websites to gather information on a broad basis.
Regarding fund houses, digital accessibility and transparency on an overall basis present a heterogeneous picture. There is certainly room to improve, which provides a window of opportunities for smart fund providers.
While digital will never replace human contact at full-scale, the role of sales people has increasingly shifted away from traditional sales roles towards consulting with thorough knowledge on the entire value chain. The accelerando survey reveals sales people are bringing added value to fund selectors, but for the majority not on a broad basis. Asset managers should see this as a call for action.
How would you rate fund houses’ digital accessibility and transparency on an overall basis?
Do fund houses’ sales staff meet your requirements, adding value to your analysis and decision making process?
Information gathering and communication with fund houses: Do you use digital channels (websites, apps, etc.)?
Source : accelerando associates - Swiss Fund Selector & Senior Sales Surveys
Note: No respondent answered the option “No, not really”
Note: No respondent answered the option “No, not really”
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Overview of Swiss institutional investors
Pension funds
Insurance companies
Fund of funds Foundations
1 2 3 4Pension funds
The pension market in Switzerland is developed with AuM of about CHF 786.9bn in 2015. Swiss pension assets accounted for 123% of the country’s GDP (CHF 639.0bn) at year end 2015.
Insurance companies
Switzerland’s insurance industry is the seventh largest in Europe.
There were 214 insurance companies operating in Switzerland which collectively held CHF 560.8bn AuM in 2015.
Fund of funds
Swiss domiciled funds have experienced constant growth reaching CHF 83.9bn AuM in 2015. Even though the size of the industry appears small, a lot of fund-based assets are managed out of Switzerland.
Foundations
At the end of 2015, there were 13,075 foundations in Switzerland which representd a 41.6% increase since 2000. Nevertheless, the absence of dedicated foundation funds might represent an untapped potential for foreign providers.
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Dariush Yazdani Partner, PwC Market Research Centre
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Philip Kalus Founder & managing partner accelerando associates
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Daniel Pierce Partner accelerando associates
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Jean-Sébastien Lassonde, ACA, CPA, CFA, CAIA, CPA (US) Partner and Leader, PwC Switzerland
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