Edhec-Risk
Features
Performance Measurement - July 22, 2008

Alpha League Table Switzerland

The reference rankings in Europe

The third edition of the Alpha League Table 2008, following on the heels of studies of French, Italian, and Spanish asset management, is devoted to Switzerland.

This new edition 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 great robustness of the results.

The private bank Sarasin takes the top spot in this 2008 edition of the rankings. 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. 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 several months. According to figures from Swiss Fund Data, equity funds posted redemptions totalling 13 billion Swiss francs in 2007. In the first quarter of 2008, redemptions amount to 2.7 billion 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 fifty 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.

The private bank Sarasin takes the top spot in the 2008 edition of the Alpha League Table Switzerland. After having ranked third in 2006 and second in 2007, the firm 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 83 billion Swiss francs.

Sarasin’s average alpha (3.65%) is up 54 basis points on last year. This average alpha comes from portfolios invested internationally (they account for 65% of the firm’s alpha1) and in the home market (the source of nearly a third of alpha). Seven funds did particularly well and did so recurrently. The firm’s 62.6% frequency of alpha is a clear improvement over the year before (+190 basis points) and is among the best of the top ten. Sarasin takes the top spot with a score of 2.26.

With a score of 1.84, the specialised asset managers Vontobel are in second place. Excellent results are obtained over a wide range of equity funds. Some twenty investment vehicles delivered returns in excess of their benchmarks, an achievement that has become a veritable Vontobel trademark. With its private banking, investment banking, and asset management businesses, Vontobel had 79.5 billion Swiss francs of assets under management as of late 2007, 12% more than the year before. The range of funds that we spotlight here has done particularly well in international shares and sector funds (the source of 55% of the average alpha of the company), in Swiss shares (20%), and in European shares (14%). Outperformance indicators posted significant improvements: average alpha is 2.91% (+69 basis points) and frequency is 63.6%. The performance of funds registered in Luxembourg accounts for a fair share of the results of the two highest-ranked firms, confirming the international nature of Swiss asset management. The latest figures from Swiss Fund Data show that 60% of assets managed in Switzerland are done so through foreign-registered funds2.

Third in the rankings, with a score of 1.22, is the bank Swisscanto, third last year as well. Alpha is delivered by the bank in six categories and comes to 2.91%. The gain frequency of 41.6% is an improvement on last year. Twelve investment vehicles did particularly well. International shares (the source of 70% of alpha), Swiss shares (13%), and European shares (9.3%) account for the bulk of the alpha generated by the bank.

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 sixty 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%. Crédit 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 eighteen 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.



The chart above breaks alpha funds down by investment zone. Most outperforming funds are to be found in the largest zones and also in the domestic market. For example, international shares accounts for nearly 30% of the funds that outperform their benchmarks. The Swiss equity markets account for 21.5% of these funds and Europe for 12.6%.

More specialised themes, such as sector investments, are likewise a source of alpha for Swiss asset managers. The range of products invested in neighbouring countries is relatively narrow. Only Germany is a source of alpha for asset management firms in Switzerland. No investment vehicle invested in euro-zone shares generated significant outperformance. It seems that Swiss asset managers have a much more pronounced international vocation than do their French counterparts. After all, the study of the French market showed that 21.5% of outperforming funds were in the international shares category3, while the proportion for Switzerland is closer to 30%.

The alpha measured over the different investment zones registers but a slight drop from last year. It is thus sufficiently significant in those zones that have the greatest concentration of funds. This is especially the case with products invested in international shares, where the average alpha rose to 2.44%.



The bias of portfolios toward growth styles (to the detriment of value styles and small caps) has allowed them to maintain levels of alpha from one year to the next. The style deltas are quite pronounced, with average movements of close to 15% revealing the reactivity of Swiss asset managers.



The major global stock markets have been trending downward, with great volatility, for almost a year, so the defensive stance taken by managers is certainly legitimate. Risk management has become a priority and greater liquidity of underlying instruments serves to protect portfolios. As a result, large-cap stocks make up the majority of the portfolios invested in the major investment zones: international, North America, Europe, and, to a lesser extent, Switzerland.



According to the Swiss Institutional Survey, a survey of major Swiss institutions representing 40% of the assets managed in the country, the use of index-type share management is nearly as great as the demand for active management. The assets managed in these two approaches to the management of a portfolio made up exclusively of stocks are in any case similar.



References and Footnotes

  1. Including sector funds
  2. http://www.swissfunddata.ch/statistics/marketstatistics_fr.html
  3. Data are as of February 2008.


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