The fund management industry in Switzerland continues to be one of the most dynamic markets in Europe, despite growth of assets slowing down. According to figures published by the Swiss Fund Association (SFA), the country’s fund market didn’t attract significant inflows during last year, even though the number of new funds in the market has increased considerably.
At the end of 2001 the total assets invested in funds managed by Swiss companies in Switzerland and abroad, and authorised for sale in Switzerland, accounted for SFr473bn, (E323bn) virtually the same figure that the one registered in December 2000. According to SFA, money market and bond funds where the fund types which experienced the largest growth. Money market funds saw a 36% increase in assets to SFr106bn, attracting money coming from investors looking for no price risk and quick access to their capital. Bond funds, on the other hand, had a 2% in number of assets to SFr99bn.
Risk-aware investors in Switzerland have approached equity funds with certain caution resulting in a 13% fall of assets in this type of funds that at end of 2001 accounted for SFr150bn.
For quite some time, fund providers in Switzerland have been looking abroad when it comes to domicile of their funds. The fact that most funds in the money market and bond sector are now domiciled in Luxembourg meant that at the end of last year foreign funds had 71% market share in the total Swiss fund market. Just focusing on the money market sector, only SFr8bn of the total SFr106bn was invested in funds domiciled in Switzerland, with the all the rest being invested under Luxembourg law.
More and more Swiss investors, who traditionally have always invested high percentages in direct property holdings, have found in real estate funds the best way to maintain their exposure to this asset class avoiding the hassle and lack of liquidity of direct real estate investments.
The Swiss fund market, which has always been characterised for its innovative nature, has also absorbed investment vehicles being used in other markets. This is the case, for instance of exchanged-traded funds (ETFs), launched in 2001 by UBS and Credit Suisse.
Efforts to project Switzerland as a fund domicile in the international arena have so far had a limited success. Even though the current provisions for those funds under ‘other funds’ category make the Swiss Investment Act (IFA) compatible with EU standards and very flexible and this has attracted interest among fund managers in launching innovative products, Swiss ‘securities funds’ have not yet found easy access to EU markets, except for France, limiting the launches of such investment vehicles.
However, and despite market turbulence, the fund market in Switzerland has been very active in the recent past. According to SFA around 700 new funds were authorised for public sale in the country in 2001, and at the end of the year a total of 3,260 funds were on offer in the market. Most of these funds were Luxembourg-based mainly issued by foreign providers wanting to attract interest from Swiss institutional and private investors.
According to data from the Swiss National Bank Swiss institutional investors use investment funds to allocate around 12% of their total assets, which represents a 18% of total fund holdings. Although these percentages are still low, the trend among institutions towards investing more through funds is more obvious in some asset classes than in others.
In the alternative arena, the number of pension funds using funds of funds vehicles is growing. And, in the real estate arena, the fact that pension funds are getting rid of their direct property holdings and following an indirect approach through investment funds, has increased the assets under management in their funds and in new launches of funds to suit the institutional needs. In general, Swiss pension funds are not looking at funds when it comes to managing traditional asset classes, but for specialist products where the aim is to achieve diversification and risk control, investment funds are their preferred choice.

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