Distribution - What You Need To Succeed In The Swiss Financial Marketplace
Possibly it is the much-lauded political stability, or maybe it’s the fine view over Lake Zurich or the excellent chocolate that attract investors in droves to Switzerland. In any case, the Swiss financial centre is attractive to both international and domestic investors alike. At year-end 2010 assets under management in Switzerland totaled around Sfr 5,500 billion, of which slightly more than half were invested by foreign clients. Clients can choose from a vast array of financial products: more than 670 banks and securities dealers sell almost 7,500 funds, making Switzerland a crowded market.
Here is a short review which will help you assess whether distribution in Switzerland is an option and how you might go about it.
I’ve Heard About Regulatory Changes. What Is Currently Happening?
While Switzerland is not a member state of the EU, it obtains access to the internal market by adapting its policies and regulation to meet EU standards. As the EU Alternative Investment Fund Managers Directive (AIFMD) is to be implemented in EU member states until mid-2013, a revision of the Swiss regulatory framework, the Collective Investment Schemes Act (CISA), is currently being debated.
What Do These Changes Mean For Fund Providers Looking To Distribute In Switzerland?
The new CISO will request that all CIS distributed (whether to individual or qualified investors) must appoint a legal representative and a paying agent in Switzerland. There will be no need to register products distributed only to qualified investors. But there will be a duty to appoint a legal representative, where Swiss investors can get information about the foreign CIS.
What remains completely unclear at this stage is the amount of concrete tasks, duties and responsibilities the legal representative will have under the new regime.
How Should I Register My Products?
While Switzerland is not a member state of the EU, fund managers can choose to register their Ucits funds for public distribution in Switzerland. Private placements with institutional investors are also possible with non-UCITS funds, however, pension funds in particular have stepped up their demands as to the regulation of funds they would invest in. Today, trustees in the board of a pension fund will more often than not ask for completely transparent and regulated financial products.
Which Are My Target Groups?
Pension fund trustees have different requirements and incentives to portfolio managers in private banks. Differentiating between wholesale (into wealth management) and institutional clients is essential for any business plan.
Which Products Will Sell In Switzerland?
Currently, there is a lot of demand by Swiss investors for global asset allocation modules. Also, many clients are searching for a substitute for fixed income strategies which reduce volatility. With regards to the types of funds being launched, there are a couple of key trends. One is the desire to replace traditional bond funds with Emerging Market high yield, local currency products and fixed income absolute return funds. Switzerland has traditionally been a hub for Emerging Markets. Secondly, on the equities side, specialised US and European equity funds are gaining momentum.
Is Cross-Border Distribution An Option?
From our experience, a committed sales professional in Zurich or Geneva can work wonders in the Swiss market given sufficient time and resources. To build awareness and create interest for your products, you will need about a year. You can expect to see inflows once you have an (institutional) client base who you know personally. If you target retail clients, you will have to invest in branding and establishing a reputation, as well as spending time building trust with advisors.
What Do I Need To Get Started & To Maintain The Relationships?
For successful market entry, having the distribution network up and running quickly is crucial. You can expect demand from investors within the banks, but if your distribution network is not set up correctly you will not gather assets. Often managers find that as they get more sales traction, what starts with a small number of distribution contracts and demands for information grows into a complex network of agreements and operational activities. This is both expensive and requires intensive management.
ACOLIN helps asset managers develop new markets for Ucits funds – cost-effectively and quickly. We offer a range of distribution administration services, acting as your Swiss legal representative, providing access to a network of distribution agreements and offering sales and marketing consultancy services. Our distribution management services offer access to distributor platforms and our sales support opens the doors to potential clients. For a portfolio manager who is serious about the Swiss market, we can create tremendous business opportunities.
On an ongoing basis, ACOLIN will manage the distribution administration for you, while you can focus on managing money and building long term relationships with investors.
What do I do next?
We would love to help. Please contact ACOLIN either in our Zurich or our London office to discuss your distribution strategy.
Daniel Häfele is CEO of ACOLIN Fund Services. ACOLIN’s service range includes fund registration, legal representation in Switzerland, and access to a network of European distributors. Daniel was founder of Fondvest AG, a fund-based asset management company which he sold to UBS in 2001.
Daniel Häfele can be contacted via email at firstname.lastname@example.org