Switzerland has been the global center for private banking for decades. An exclusive survey shows how this is changing, with observers believing key turning points are only a few years away.

The major Swiss banks seem to be increasing their clout in the asset management industry, according to a recent finews.com survey conducted in close cooperation with T. Rowe Price. Only 19.8 percent of those surveyed in 2019 thought that Swiss banks had a strong position in the asset management industry, but that number has now risen to more than 28 percent (chart below).

Chart Grossbanken 500 E 210622

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Around 300 employees were polled in the survey and almost 40 percent (34.27 percent and 5.24 percent) of them thought that asset management would become more important than private banking for Swiss finance as a whole (graphic below) in ten years.

Chart AM PB 500 E 210622

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«Switzerland continues to be seen internationally as a private banking market. But asset management is becoming more important», said Paolo Corredig, Country Head Switzerland for T. Rowe Price.

Not Resting on Any Laurels

About nine of ten of those asked rated asset management as important or very important for Swiss finance.

«But we cannot rest on our laurels. There are challenges facing the industry out there, particularly the continued low-interest-rate environment and the increasing demand for sustainable products», Corredig added.

Indeed, many asset managers are launching sustainable investment products, so much so that the question becomes increasingly relevant as to whether there is enough demand for them. According to the survey, that seems to be the case. Almost 60 percent of those surveyed believe that sustainable investments will be a central investing theme in the future.

Falling Margins

Respondents also said that passive investments would continue to have a very high role in the industry, with almost half believing that volumes would continue to rise over the next few years. Cryptocurrencies will also be increasingly in demand. On the other hand, things such as robo-advisors, or absolute return and Smart Beta investment strategies were rated as almost irrelevant.

Exactly 82 percent of those asked assume that the sector's margins would continue to fall as ETFs are increasingly seen as serious competitors.

Extreme Valuations

«Many passive investment strategies have massively benefited from extremely relaxed central bank monetary policies. Ultra-low interest rates combined with trillions of dollars in fresh capital have led to an extreme rise in valuations since 2008. Still, even given such an environment, asset managers with strong fundamental research has used the opportunities that have resulted from other mega-trends such as digitalization», Corredig explained.

«After the start of the pandemic, we saw a challenging environment with high fluctuations in the equity markets. Active managers who had enough liquidity and had done their homework used the situation to outperform,», T. Rowe Price Country Head maintains.

Performance is (Almost) Everything

Performance is far the most important factor in the Swiss asset management industry and the domestic legal system and overall political stability are not seen as important, the survey also indicates.

COVID-19 did not have much of an impact and almost 60 percent of asset managers said they were «satisfied» or «very satisfied» with performance since March 2020. Only 15.5 percent of participants were «unsatisfied» or «not very satisfied».

Useful Panic

It certainly helped that the losses sustained by the panic last March were made up in record time. Fund managers that used their liquidity to shore up their positions in the midst of it saw very robust performances by the end of the year.

Service ratings were also very positive in the survey, with over 75 percent of participants believing that asset managers were able to adequately fulfill client needs during the pandemic.

  • Survey winners will be contacted by T. Rowe Price directly.