Aside from great chocolate, stunning ski resorts and high-quality watches, Switzerland is home to a global hub for wealth management. There are 586 banks and more than 3,500 independent wealth managers operating in a country with a population of 8m.
Fund groups of any size and from all over the world are active in the Swiss market. Non-Swiss domiciled funds can be sold in Switzerland in the form UCITS and AIFs (e.g. hedge funds, private equity, real estate funds). These now account for 82% of the more than 8,700 funds approved for distribution by Swiss regulator FINMA, but they only make up 44% of the total fund assets. And it’s worth noting that local funds enjoyed higher AUM growth than foreign funds in 2015, which suggests that the Swiss brand still makes a difference to Swiss fund selectors.
Yes, it is a good idea to make sure your funds are accessible on the UBS Fondcenter platform if you are looking to distribute in Switzerland, but there is a lot more to be done. For example, a number of foreign fund groups have opted to build local structures that include an office, salesforce and Swiss domiciled funds. The latter allows you to distribute through the entire pool of independent wealth managers, because those who are not directly regulated by FINMA are not allowed to manage portfolios with UCITS funds. These independent wealth managers are a fragmented but dynamic mix of small wealth managers, family offices and advisers – and they are attracted to new and sophisticated funds! We discuss this and other opportunities in our latest research report on fund distribution in Europe: Switzerland and Sweden in Focus.
So after all, being outside the EU and the EEA hasn’t stopped Switzerland from being a hot spot for the global fund industry. Swiss banks and wealth managers can manage money on behalf of EU investors, even though fund passporting is not reciprocal and Swiss fund groups don’t benefit from it.
What does this tell us about the future of UK asset management post-Brexit?
It’s too early to tell which parts of the single market the UK will have access to. But if we take the Swiss example, we predict that London will retain its dominance as an exporter of investment management services into Europe.
The largest UK fund groups have already established a presence in the main European fund markets or are in the process of doing this. So it’s just the smaller and mid-sized players who might see their European ambitions badly hit by the inability to passport their funds into EU countries.
One possibility is that Swiss and UK fund groups join forces to gain access to the single market for funds. But following recent advice from ESMA, we may well see Swiss fund managers of AIFs having access to it even before the UK exits the EU… bringing more competition into our institutional space. In any case, we are positive that there will be plenty of opportunities for UK companies in post-Brexit Europe.