The Swiss hedge fund industry is well positioned but the implications of the Directive on Alternative Investment Fund Managers are still unclear, the Swiss Funds Association says.
At an SFA media conference, Hans-Jörg Baumann, chairman of the Alternative Investment Council and chief executive and chairman of Swiss Capital Alternative Investments, addressed the current situation for hedge funds.
In the first five months of this year, the HFRX Global Hedge Fund Index lost 0.26 per cent while the HFRI Fund of Hedge Fund Index slipped back 0.54 per cent. Over the same period the MSCI World Index lost 7.59 per cent, the S&P 500 fell 2.30 per cent and the Nikkei shed 7.37 per cent. Assets managed by hedge funds worldwide rose by four per cent in Q1 to USD1,668bn. The net inflows came mostly from institutional investors, with private clients still holding off.
“The alternative investment industry is on a growth path, above all in the institutional segment. Viewed over a longer period, alternative investments generate clear added value for investors compared with traditional benchmarks in the form of higher returns coupled with reduced risk,” says Baumann.
Due to the financial crisis, liquidity and security are the aspects that investors are focusing on above all. Providers have responded to this with the separation of liquid and less-liquid strategies, as well as customised solutions. There is also a clear demarcation being made between products for private clients and those for institutional investors.
Swiss-domiciled providers of alternative investments are well positioned, and hold a substantial market share of 32 per cent in the global business. Of the 114 multi-manager hedge fund providers with over USD1bn in assets under management, 22 are based in Switzerland or conduct a significant part of their business activity here. Together, these 22 providers manage assets totalling USD200bn, and thus make a significant contribution to value creation in Switzerland.
“Institutional clients are currently placing more emphasis on risk, processes and structures than before the financial crisis. Multi-manager concepts are very well suited for many of them, although these solutions are resource-intensive. However, funds of hedge funds, managed accounts and Ucits III also offer good investment opportunities,” says Chris Manser, global head of funds of hedge funds at AXA Investment Managers.
There are currently two very different versions of the AIFM directive. The SFA says it is not possible at this juncture to gauge who will gain the upper hand in the three-way negotiations between the Council of the European Union, the European Commission and the European Parliament. Given that the directive covers all non-Ucits, and their managers, that are distributed in the EU to professional investors, it has substantial implications for third countries such as Switzerland.
“For Swiss asset managers, a liberal delegation principle comparable with that in the case of Ucits would be a good solution. As regards the possibility of marketing third-country funds, we also hope that our members will be able to continue to market these at least in individual EU member states on the basis of existing national regulations,” says SFA chief executive Matthäus Den Otter (pictured).
