EUROPE - The importance of consultants in giving advice to Swiss pension funds is rising, reports Christine Senior.
One of the principal factors behind this is the relaxation of constraints on investments.
With a greater degree of freedom to take risk, pension funds have more need to do asset/liability studies to establish their risk tolerance, and consequently consultants are picking up more business.
A survey into pension fund investments from 2000 to 2002 conducted by Robeco (Suisse) SA, Bilanz magazine and Schweizer Personal Vorsorge found that pension funds were asking for advice particularly in specialist areas such as asset allocation, the use of passive versus active investment styles and choice of manager.
In the past many pension funds have turned to their banks or asset managers for advice, and many continue to do so, though that advice is limited compared with what a consultant can offer.
Andreas Schlatter of UBS Global Asset Management said: “If a client says ‘what’s your view on diversifying assets?’ we tell the client our view. We say what we think, we say this from a neutral angle - from that point of view we are giving advice.
“Our role goes sometimes beyond purely managing assets. But we are not offering advice in the sense of being paid per hour - that’s the consultant’s business.”
Consultants can of course also provide actuarial advice, and they can offer unbiased advice on investments. Bernard Laperrousaz, director of institutional clients at Lombard Odier Darier Hentsch, thinks their role will develop further.
“Consultants will in future be more important because we have to establish between the bank and the institution someone in between to analyse and be completely neutral,” he said.
“More and more pension funds are asking consultants for that kind of help”
The increased complexity of investment products and the level of crucial decisions needed to be taken by investment committees puts consultants’ advice at a premium.
“When we consider pension funds are considering more and more hedge funds, private equity - more sophisticated products - they need more outside support,” added Laperrousaz.
“The more the market gets difficult the more important is the consultant to the client. When we get a new mandate more than 50% of RFPs are coming from consultants.”
Consultants have a bigger influence in the German speaking part of Switzerland where the biggest companies are located. And Swiss consultants continue to have a large market share, resisting inroads made by the global players.
The conflict of interest issues surrounding the provision of multi-manager products that have hit some of the big global investment consultants have bypassed the Swiss consultants.
Alfred Buehler at Swiss consultant PPC Metrics said: “An important difference between us and foreign consultants is we are not involved in asset management business at all.
“We are independent of any asset managers.”
But he admitted: “It is difficult for us. You can have higher fees with asset management than just consulting.”
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