Sustainable Investments and Product Specialisation as Opportunities
The Institute of Financial Services Zug IFZ, part of Lucerne University of Applied Sciences and Arts, and the Asset Management Platform Switzerland have produced the second edition of the IFZ/AMP Asset Management Study providing a comprehensive overview on asset management in Switzerland. It shows that the sector has assets under management totalling CHF 2,161 billion and a positive environment on an international comparison. Regulation is the most pressing challenge while specialization and sustainable investments are identified as opportunities by Swiss based asset management firms.
Switzerland is a strong asset management hub and asset management matters for the economy.
Switzerland offers favorable conditions for asset management companies to thrive. In particular, a stable and reliable political/legal environment and a strong education system with a highly skilled labor force are identified as key success factors. In terms of the market size, the total volume of assets managed by banks, fund management companies, securities dealers, and FINMA-supervised asset managers in Switzerland at the end of 2018 amounted to CHF 2,161 billion, which is approximately three times the size of the Swiss GDP and about twice the amount of assets held in Swiss pension schemes. In other words, these are the assets managed by asset management companies in Switzerland for domestic and foreign clients. CHF 1,243 billion of this was held in collective investment schemes and CHF 918 billion in institutional mandates. The total figure represents a slight decrease of 2% year-on-year which can largely be explained by the sharp drop in global stock prices that occurred in the last quarter of 2018. Our estimates further indicate that about 9,900 jobs (3% year-on-year growth) are directly related to the asset management industry in Switzerland, while about 45,600 people are indirectly employed by the industry in the wider scope.
"Asset management substantially contributes to the growth and reputation of the Swiss financial centre. Switzerland is one of the largest and most dynamic asset management hubs in Europe. Swiss based asset management companies play an important financing role by channelling savings into the real economy. By doing this, they create jobs and strengthen the economy," says Lorenz Arnet, CEO of the Asset Management Platform Switzerland.
Regulation is the most pressing challenge while specialization and sustainable investments are seen as opportunities for the Swiss asset management industry
The authors of the study conducted a sentiment analysis among Swiss-based asset managers. In this context the analysis revealed that regulation was perceived as the most pressing challenge. In this context, about 70 percent of the respondents think that the relation between regulatory costs and regulatory benefits is unbalanced and a majority of the surveyed asset management firms consider regulatory costs to be high. Asset managers in Switzerland see potential for regulatory improvements in the abolishment of the stamp duty and in a reduction of the withholding tax. The largest opportunities are seen in product specialization and sustainable investments and the least opportunities in passive investments.
"In order to have a competitive advantage in the asset management industry it is important to choose a business model where the focus is either set on cost leadership or product specialization. Our survey results provide evidence that Swiss-based asset managers tend to focus on specialization with clearly defined core competencies," says Jürg Fausch, economist and co-author of the study at Lucerne University of Applied Sciences and Arts.
Active management dominates the business model and the asset allocation of Swiss-based asset management firms.
About 70 percent of the assets managed in Switzerland are actively managed and 30 percent are passively managed. Among discretionary mandates, about two thirds of the assets are actively managed while for collective investment schemes about 80 percent of the assets under management are managed using an active approach. These numbers corroborate the finding from the sentiment analysis, that Swiss-based asset managers focus on specialized, actively managed products in order to establish a competitive advantage. Moreover, asset managers in Switzerland have a strong exposure to alternative asset classes, which very often follow active portfolio management strategies.
Lucerne University of Applied Sciences and Arts – the university for professionals in central Switzerland.
Lucerne University of Applied Sciences and Arts is supported by the six cantons of central Switzerland. Its faculties are Engineering & Architecture, Business, Information Technology, Social Work, Art & Design and Music.
With around 6,500 undergraduates and 4,400 postgraduates, almost 500 current research projects and some 1,700 staff, it is the largest educational institution in the heart of Switzerland.