The Trends Shaping Swiss Asset Management

Last year was a very difficult one for Swiss-based asset managers. Looking ahead, client acquisition will be one of their most pressing challenges.

Switzerland’s success story is closely linked to its world-class financial industry, with financial and insurance services contributing significantly to the country’s economic performance. Last year, the sector accounted for 8.9 percent of total economic output, corresponding to nearly 70 billion Swiss francs of added value. Asset management is becoming of increasing importance for Switzerland as a business location.

According to estimates, the sector contributes between 0.95 and 1.2 percent to Switzerland’s gross domestic product which is about 11 to 13 percent of the value added by the Swiss financial sector, according to a study by the Lucerne University of Applied Sciences and Arts (HSLU) and the Asset Management Association Switzerland (AMAS). This year’s «Swiss Asset Management Study 2023» involved 58 financial institutions among the largest and best-known in their industry.

Improvement in Sight

The turmoil in the international financial markets, inflation dynamics, and the sharp rise in interest rates made last year a major challenge for Swiss asset managers, which suffered after a record year in 2021. At the end of last year, domestic institutions managed a total of just under 2.9 trillion Swiss francs, a drop of 13.2 percent from the previous year.

Despite this significant decline, there’s also good news to report in the longer term. For example, the volume of assets under management in Germany has grown by an average of 6.5 percent per year since 2016.

Recent estimates also suggest that assets under management in Switzerland increased by around 2.9 percent in the first half of 2023, once again reaching the three trillion level at the end of June.

Pension System’s Key Role

Thanks to increased cost efficiency, the industry recorded robust business performance last year despite the difficult market environment. The net income pool at the end of last year is estimated at 14.4 billion francs, compared with 16.5 billion in 2021, generating respective profits of 4.89 and 4.95 billion francs, respectively. Thanks to efficiency improvements in operations and processes, the cost-income ratio fell to 66 percent from 70 percent previously.

The study also shows that Swiss-based asset managers aren’t only important taxpayers. Between 2018 and 2022, they paid a total of around 3.5 billion francs in federal, cantonal, and municipal taxes, and made a significant contribution to the pension system.

Since 2004, around 32 percent of pension fund assets have been accumulated through net investment income, corresponding to around 452 billion francs with asset managers playing a key role in the employer-funded second pension pillar in Switzerland.

AIs Increasing Importance

The survey results reflect that digitalization will strongly change the financial sector and become an important factor in the competitiveness of the industry. Artificial intelligence (AI) and machine learning (ML) are increasingly taking center stage among asset managers.

Around two-thirds of the companies surveyed say these technologies will have the greatest impact on the industry over the next ten years, while sustainability continues to be seen as a promising opportunity.

Customers Sought

For the first time since the survey’s 2018 inception, customer acquisition is seen as the most pressing challenge, followed by regulation and competition. Tapping into new growth opportunities in foreign markets is crucial for future growth, especially with the domestic market limited and competition intense.

Expanding existing strengths and innovations in the area of alternative investments or establishing Switzerland as a leading international hub for sustainability can contribute to increasing competitiveness.

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