«This bank is worth as much as the name that is written on the door: Syz,» Founder Eric Syz says in an exclusive interview with finews.com. «The customers are there because of the quality of our investments, as well as for our values, and because the family co-invests. If we were to sell the bank, that many of these features would be gone or at least at risk,» Syz adds.
Eric Syz, last year your assets under management shrank again by 1.4 billion Swiss francs after they had already decreased by 2 billion Swiss francs in 2019. What is the reason for this continuing decline?
It's related to the Oyster fund division. In 2019, the decline was performance-related, while in 2020 the sale led to the decline. In that respect, 2021 should see a normalization.
You reportedly had exceptional investment performance in the Corona year 2020. Can you explain that in more detail?
In our businesses, sentiment, i.e. market sentiment, takes on above-average importance, not least due to the media, which in turn often leads to overreactions. In contrast, we have an institutional-quality investment process and try to remain sentiment agnostic and derive our investment strategy based on our quantitative models and macroeconomic data.
«As the year progressed, we remained invested, confident in an election victory by Joe Biden»
In 2020, this led us to hedge and partially reduce our equity exposure already at the end of February/beginning of March, because we had come to the conclusion that valuations were very high. That was before the big market correction in March, which was triggered by the Corona pandemic.
What happened then?
From the end of March and in April, we started to build up equity positions again as it became increasingly clear that economic activity around the world had not come to a standstill. As the year progressed, we remained invested, confident in an election victory by Joe Biden and also expecting that sooner or later a first vaccine would be presented, which – both – had a positive impact on the markets.
In our diversified mandates, we thus achieved a performance of just under 10 percent, and in our somewhat riskier strategy, something like 10 percent, as an independent analysis (in French only) also recently showed.
Syz Group suffered a loss of more than 8 million francs in 2020. This is significantly less than in 2019 when a minus of 25 million francs resulted. Nevertheless, what clouded the result the most in 2020?
The loss also has to do with the sale of the Oyster fund range, especially since our remaining units, Syz Asset Management and Banque Syz were profitable, while Syz Capital almost broke even just two years after its establishment and so is well ahead of its business plan.
«This streamlining now gives us new prospects, so that there should no longer be a loss in 2021»
With the sale of the Oyster fund range, although we were able to welcome a number of colleagues working for Oyster into other areas of the Group, we had to close offices in Europe and cut around 60 jobs, which includes the team that moved to iM Global Partner. That caused costs.
I also wanted to do this properly. We have been closely supporting each of these individuals as they seek their next challenge. This streamlining now gives us new prospects, so that there should no longer be a loss in 2021.
What makes you so confident?
We want to aim for qualitative, i.e. profitable, growth. Of course, we could also acquire volume bolts and customer funds at any price, as some others do. As a boutique, we define ourselves by the investment performance we offer clients. We are probably the only bank that offers the possibility to not charge full fixed management fees, but we reduce them and charge a performance fee.
«That doesn't work in the long run»
If the customer is satisfied with us, he will also be willing to pay a little more for it. Many private banks today want to be both at the same time: Zara and Hermès – in other words, cheap for the masses and luxurious for a select clientele. That doesn't work in the long run. Syz Group is clearly positioned in the premium segment.
In asset management, you managed a total of 10.5 billion francs at the end of 2020. That's about the same as a year ago. Why this stagnation?
The asset management business is a very difficult business in an environment of low and even negative interest rates. In truth, AuM on this business grew slightly, but even remaining stable is an achievement. Even if our people do an excellent job, they can no longer get much out of fixed-income investments.
«Performance ranges between 15 and 20 percent»
That's why we have had the foresight to focus on ESG investments in recent years, including issuing the first Swiss green bond fund. These measures will have a positive impact on further development.
Syz Capital, the third pillar of the Group, which specializes primarily in private market investments, manages 1.5 billion francs two years after it was founded. In which investments has this money flowed?
Firstly, in single private equity deals, in which we are always involved as a family. Another example is litigation finance. We launched the first fund with 70 million francs, which we closed recently. It was oversubscribed. Further such vehicles are planned. Litigation Finance is absolutely market agnostic, so it does not correlate with the financial markets. Performance ranges between 15 and 20 percent.
The bank announced last year that it would expand into Istanbul. Were you able to launch this business despite the Corona pandemic?
Yes, we have opened our branch and are progressing according to plan. The office supports our Turkey desk in Geneva. We are looking at other destinations. However, nothing is ready to be announced yet.
«The added value of a bank is not custody, but the quality of the investment strategy»
The trend is increasingly for wealthy individuals or families to have their money booked in Switzerland but to be served locally, i.e. onshore. We have to keep that in mind when we expand further.
What growth initiatives do you have planned for 2021?
We offer large clients the option of remaining with their traditional custodian bank but having their assets managed by us. The added value of a bank is not custody, but the quality of the investment strategy. We see enormous potential here and, thanks to our excellent capitalization, we are also in a position to grant Lombard loans to these clients.
How large clients?
Clients with assets of 10 million francs or more.
Syz Group celebrates its 25th anniversary in 2021. Would you start a bank again today, or do something completely different?
I would start a financial institution again. However, you might ask yourself whether you still need a banking license to do so. Especially if you start such a company on a greenfield site, as I did at the time. I also wish the environment for banks in Switzerland were better.
What do you mean by that?
There is too little support from the authorities and the government. They do monitor the financial center and rap the knuckles of the players, which is also their job here. But at the same time, they do far too little to promote the financial center, as Frankfurt, London, Singapore or Paris, for example, do.
«If you boarded a Swissair plane anywhere abroad, you knew that you were already a bit at home»
It seems to me that the importance of the financial center is not sufficiently appreciated, as was the case with Swissair when it was grounded. It was a fact that Swissair was of enormous importance to Switzerland worldwide. If you boarded a Swissair plane anywhere abroad, you knew that you were already a bit at home. At the time, the Federal Council took too little account of this.
The situation with the financial center today seems similar to me. The Federal Council pays too little attention to what the entire financial sector contributes to our country's economy.
Given these premises, wouldn't it be obvious to sell the bank and do something else?
Sell it? No! This bank is worth as much as the name that is written on the door: Syz. The customers are there because of the quality of our investments and services, as well as for our family values, and because we co-invest. If we were to sell the bank, that many of these features would be gone or at least at risk. That doesn't make sense. It may be that a sale would be financially attractive. But I have a responsibility to our clients and this bank and to the people who work here.
Do you receive many offers to buy the bank?
Yes, we are approached regularly.
Have you set a time horizon for how long you want to run the group or when your sons should take over all the responsibility?
Good question. I haven't set myself a specific time horizon. Of course, the bank is very close to my heart. And as long as I can still make a positive contribution and pass on my experience, I will stay with it. Otherwise, no.
To what extent has your daily routine changed since the outbreak of the Corona pandemic a year ago?
I've certainly been in the office less, which has reduced direct interaction with employees. Especially in the service sector, you solve many problems informally, in the cafeteria, in the hallway, in front of the toilet. Via Zoom, some communication is possible, but unfortunately not everything.
«We need a comprehensive vaccination program, as Israel has done»
In the meantime, a certain home office fatigue is becoming noticeable among many employees. In this respect, it would be good if people could return to the office on a more regular basis. However, as an employer, we bear a great responsibility, and if the contagion figures show up again, all the greater caution is called for.
In order for us to return to normality, we need a comprehensive vaccination program, as Israel has done. So far, that has not been the case in this country. In this respect, we are not at all exemplary internationally.
Eric Syz, 63, is co-founder and CEO of Geneva-based Syz Group. In 1975, he did a banking internship at Zurich-based Bank Guyerzeller before joining S.G. Warburg (now UBS) in London from 1977 to 1979. Between 1981 and 1984, he worked as an investment banker at the American financial group Paine Webber (now UBS) on Wall Street. He subsequently returned to Switzerland, where he worked for the private bank Lombard Odier from 1984 to 1995. In 1996, together with Alfredo Piacentini and Paolo Luban, he founded Banque Syz & Co. domiciled in Geneva. At the end of 2020, the Syz Group managed 26 billion Swiss banks with around 250 employees worldwide.
