September 2008

PRIVATE BANKS dominate Swiss Alpha

Sabrina Macaire of Europerformance and Peter O’Kelly of Edhec Risk and Asset Management Research Centre report ...

Private bank Sarasin takes the top spot in this 2008 edition of the alpha rankings of asset managers in Switzerland. This third edition of the Alpha League Table 2008, following on the heels of studies of French, Italian, and Spanish asset management, spotlights the firms that were ranked last year: all the firms that met our eligibility requirements in 2007 did so in 2008 as well, indicating the robustness of the results.

Sarasin’s average alpha improves 54 basis points to 3.65%. The frequency of alpha (62.6%) is also better than it was last year (+190 basis points) and is among the best of the companies in the rankings. Sarasin is in first place with a score of 2.26.

Sarasin’s win confirms the excellent results of its equity management and shows that it is one of the leaders of active management in Switzerland. In late 2007, its wealth management, advising, and funds businesses managed assets totalling 83bn Swiss francs (£40.8m).

With a score of 1.84, the specialised asset management firm Vontobel is ranked second. Its excellent results were obtained on a wide range of share funds. Alpha comes to 2.91% (+69 basis points) and the gain frequency to 63.6%.

Third in the rankings, with a score of 1.22, is the bank Swisscanto, third last year as well. The alpha generated by the company comes to 2.91%. The gain frequency of 41.6% has improved on last year’s.

Equity funds in Switzerland are no strangers to the wave of redemptions that has been affecting European asset managers over the last few months. According to figures from Swiss Fund Data, equity funds posted redemptions totalling 13bn Swiss francs in 2007. In the first quarter of 2008, redemptions amount to 2bn Swiss francs. From January 2007 to March 2008, the value of equity assets managed by Swiss firms fell by 23%, whereas the value of assets managed by foreign firms fell by only 14%.

The falls in the major stock markets have thus frightened away investors. All the same, the results obtained by Swiss active management are hardly disappointing. As it happens, measures of alpha and of the frequency with which it is delivered are very close to or even higher than last year’s, in spite of the bearish markets that have prevailed since last summer. For this 2008 edition of the Swiss Alpha League Table, the alpha delivered by equity management comes to 2.31%. The average frequency of alpha improves (+50 basis points) to 38.5%.

Of the 50 groups eligible to compete, only ten met the criteria for inclusion in the Alpha League Table. This new edition gives pride of place to the firms that were honoured last year: all the firms that met our selection criteria in 2007 met them in 2008 as well, a sign of the robustness of the results.

This year, there is a gap, accounted for largely by the high frequency of alpha of the two firms occupying the top spots, between these two firms and the eight that round out the top ten. Eligibility for the Alpha League Table requires at least six rated funds. The winning firms are not affected by this requirement: Swiss asset managers have extensive offerings.

In fourth place is last year’s winner, LODH. The average alpha of the Geneva bank may have fallen to 1.96%, but the number of funds on which alpha is measured has doubled from essentially five to ten. Likewise, frequency of alpha has risen to 48.12%. Unlike its competitors, LODH relies on its home market for much of its alpha: three funds, investing in mid and small caps as well as in larger cap Swiss stocks, account for half of the company’s alpha. LODH has a score of 0.95.
 Pictet et Compagnie is ranked fifth, as it was last year. Pictet’s average alpha of 2.1% is much the same as it was last year, but frequency has fallen to 44.67%. The bank’s funds outperform in nine categories.

Significant alpha is generated on international vehicles investing in particular sectors. More than 60% of the company’s alpha comes from such sectors as water and telecoms. Products invested in Swiss shares account for some 30% of average alpha.

With results comparable to those of last year, the giant UBS comes in sixth in 2008. Average alpha, obtained from the widest range of products of any firm in the rankings, comes to 2.13%. In addition to the large geographic zones, the bank shows its expertise in the German equity markets. Frequency of alpha comes to 29.5%, below the average of the firms in the rankings. It is understandable that a large banking corporation may have more trouble obtaining high frequency of alpha, as it must offer a very wide range of financial products. Nearly 60 funds are analysed; the results are altogether exceptional.

The insurer Swiss Life is seventh in the rankings (+2). Half of its average alpha of 2.08% is generated in emerging markets shares, the other half from products invested in international shares. Frequency has improved to 28.9%. Credit Suisse was unable to maintain its average alpha in 2008 but remains in eighth place. All the same, some ten funds in five investment zones stand out; last year, only five funds did so. The bank’s expertise in the German equity markets and, more broadly, in international shares, pays off. Average alpha is 2.08%. At 24.86%, the gain frequency has improved considerably (+93 basis points).

Julius Baer, ninth, has posted improved results. These improvements are the result of 18 outperforming funds. The average alpha is generated on international shares-sector funds, in particular. Rounding out the Swiss top ten, with a score of 0.22, is BCV Asset Management, the managers of BCV and Gérifonds. In seventh place last year, the bank experienced a drop in its gain frequency this year.

©  2008 Funds Europe