Audio: Swiss asset management industry goes on offensive to boost European market share

Swiss asset managers are trying to boost its prospects as new local laws and the EU’s AIFM directive come into effect in 2013. Many are concerned the Swiss industry will be negatively impacted.

Switzerland is at a crossroads for its asset management business, particularly for the alternative funds industry. Next year could be crucial for its survival.

Two major pieces of legislation are due to come into effect in 2013: the Swiss revisions to the Collective Investment Schemes Act (Cisa) in February and the EU’s alternative investment fund managers (AIFM) directive in July.

The idea behind the Swiss rule changes is to bring the country’s laws in line with the AIFM directive as well as to amend its private placement rules. The primary concern is to ensure foreign funds can still be managed from Switzerland and sold into the EU. “By implementing this new law, it is not about only regulating the funds market in Switzerland, it is to give the possibility to the Swiss asset management community to manage foreign funds, especially European funds,” comments Alexandre Col, head of the investment fund department at Banque Privée Edmond de Rothschild.

Col is worried that assets could be moved to London or elsewhere once the EU rules come into effect if the industry cannot provide its foreign clients with access to the best asset managers in the world through funds or mandates managed from Switzerland. Banque Privée Edmond de Rothschild has already stated that it will move part of its asset management company operations to the EU. Despite the change in regulation in Switzerland, it remains outside the EU. This, believes Col, will have a major impact on the industry. “[Management] will only be possible by delegation. It is why the third country rules are key for the asset management companies in Switzerland. This is also important for US asset management companies as well as Asian ones,” he says.

“To say that delegation cannot be more than 75% of your assets or even 50% or 30% [is immat­erial]. Any number is a threat to any asset management company outside of the EU,” says Col.

New hopes
Two recent initiatives may help to allay fears and potentially give the local industry a fillip.

First, the European Securities and Markets Authority (Esma) has approved co-operation arrangements between the Swiss Financial Market Supervisory Authority (Finma) and the EU securities regulators for the supervision of alternative investment funds, including hedge funds, private equity and real estate funds.

The co-operation arrangements include the exchange of information, cross-border on-site visits and mutual assistance in the enforcement of the respective supervisory laws. This co-operation will apply to Swiss AIFMs that manage or market alternative investment funds (AIFs) in the EU and to EU AIFMs that manage or market AIFs in Switzerland.

The agreement also covers co-­operation in the cross-border supervision of depositories and AIFMs’ delegates.

“The agreement by EU and Swiss supervisors to facilitate co-operation on the supervision of cross-border alternative funds is an important step in increasing investor protection and the global consistency of supervision,” says Steven Maijoor, Esma chair.

The deal will improve cross-border supervision of the funds business and reinforce investor protection in cross-border operations of alternative funds, according to Anne Héritier Lachat, Finma chair. “The agreement is timely… It will establish a framework for cooperation between supervisory authorities required under the AIFM directive to manage, market and delegate the management of EU alternative funds,” she adds.

ESMA sees the agreement as a signal of third countries’ willingness to co-operate to meet the requirements under the AIFM directive.

Meanwhile, the Swiss Bankers Association and the Swiss Funds Association has come up with eight areas for action designed to create the right environment for growth of the asset management business in the country.

Although Switzerland has a reputation for wealth management, its role as an asset management centre providing products and services for institutional and private investors, is a business area that has so far received little attention in Switzerland or abroad. Most banks in Switzerland have their own asset management activities but these are rarely regarded as a ­standalone part of the core business.

A 2011 study by the SBA and Boston Consulting Group showed that the focused expansion of asset management as a business area could boost gross revenue by up to Sfr1.8 billion ($1.9 billion) by 2015.

Strengthening asset management will put the Swiss financial centre on a broader footing, complement existing business areas and make up for those that are in decline, say the two associations.

The areas to promote growth that have been jointly agreed include establishing a Swiss asset management brand as well as developing and applying standards for asset management, ensuring appropriate regulation and improving market access. The two groups want to promote “the right vehicles and structures for asset management” and also establish “an optimal tax environment, including various levies for investors” while expanding infrastructure and providing specific training for the sector, according to a white paper issued by the groups.

How the industry develops in 2013 will be crucial for its continued existence. If, as some fear, there is an exodus of asset managers from Switzerland into the EU, the industry could be fatally wounded. Others hope the revised Cisa coupled with agreements with the EU and a generally more proactive stance by the Swiss industry will actually improve prospects for this sector of financial services.

Read more
White paper on asset management in Switzerland
Cisa rule changes and industry reaction