As independent fund managers continue to grow in an environment characterised by regulatory pressure, critical challenges and rapid technological change, the EAM model continues to demonstrate its adaptability. In this interview, Claudio Mellini discusses the structural changes currently shaping the sector.
How do you assess the current dynamics of the independent asset management market in Switzerland?
Clearly, these dynamics are very positive. EAMs continue to show solid growth in assets under management, driven by a flexibility that banks have largely abandoned under regulatory pressure. A bespoke approach and the ability to tailor services to clients’ actual needs make all the difference. It is clear that generational change is also a factor. New wealth holders are seeking an independent path, which they do not necessarily find with banks.
Moreover, many banks now recognise that they generate more growth through their EAM divisions than through their private banking divisions. Added to this is a fundamental trend in private markets and club deals, which is redefining allocation strategies and opening up new opportunities for the independent sector.
What structural changes are set to reshape the profession?
The regulatory framework has drastically changed the landscape. Compliance, risk management, governance, anti-money laundering… All of this already existed, but the LSFin and the LeFin have significantly raised the bar, and asset managers must now comply with formalities that were not previously required.
Today, organisations of a certain size are generally well-structured; they have executive committees, responsibilities are clearly allocated, and they often work in partnership with external service providers. Furthermore, the increased formalisation of internal processes has made it possible to structure them more effectively and improve their transparency. This, in turn, has made it all the easier to carry out the controls required by the legislator.
On the other hand, the expected consolidation has not taken place. Switzerland has more than 1,500 asset managers authorised by FINMA, and each of them values its autonomy and entrepreneurial independence, including aspects relating to portfolio management.
Of course, some mergers between asset managers have taken place and have been successful. In some cases, however, the firms that had decided to merge subsequently chose to regain their independence.
Only time will tell whether the situation is set to change. For my part, I hope that the Swiss financial centre will continue to provide a framework that also allows smaller asset management firms to thrive. Of course, if certain requirements – particularly regarding capital adequacy – were to be tightened and become more restrictive, we would probably see an increase in mergers and acquisitions.
It is also important to note that cross-border activity within Europe is now subject to increasing constraints. These limit the ability of Swiss asset managers to serve, from Switzerland, clients based in several strategic European markets. This situation is particularly challenging for asset managers in Ticino, given the proximity to Italy, where European rules are applied with particular rigour.
In order to address these constraints, which, in my view, are set to become increasingly onerous, our company has decided to establish a regulated advisory firm in Italy, so that we may continue to develop, onshore, a market that remains strategic.
Finally, I would say that artificial intelligence will also reshuffle the deck, particularly when it comes to administrative and back-office tasks, but also in the field of wealth management. Large banks can devote considerable budgets to this, whilst the situation is more challenging for independent asset managers, even though the tools already available also bring them efficiency gains.
What is the investment philosophy that sets Capitalsuite apart in its market?
Standing out is a difficult task. The rules, markets and instruments are the same for everyone. As for our philosophy, it is based on four pillars. Firstly, independence, with an open architecture that gives us genuine freedom of choice when dealing with banks.
Next, diversification – which remains paramount in our industry – through a mix of active and passive management tailored to each asset class.
Investment quality: we do not seek to capitalise on short-lived trends, but to take a long-term view.
And finally, risk management, a fundamental task for any professional fund manager.
These four pillars apply equally to a traditional mandate held with a custodian bank and to the comprehensive support provided to a family through a Family Office. In the latter case, our role extends beyond the mere buying and selling of financial instruments. We manage the family’s entire wealth, extending well beyond financial assets alone.
How do you balance active allocation decisions with long-term strategic positioning within portfolios?
Strategic allocation is the destination. It remains stable over time, barring any radical change in the client’s circumstances, as their risk and return profile does not normally change from one year to the next. Tactical allocation, on the other hand, is the route to take to get there, and this route depends on current market conditions.
In recent years, equity markets, particularly in the United States, have been driven by a handful of dominant stocks. Active funds, which are more diversified, have not always matched this performance as well as passive indices.
We therefore shifted part of our equity exposure towards passive management. In the bond market, however, the active funds we had selected continued to outperform their benchmarks, and we retained them. Every firm follows its own path based on its experience, and what we have done is just one example amongst many. What we seek above all to avoid is market timing driven by emotion.
How has the current macroeconomic environment, characterised by greater volatility, changed the way you construct and diversify your portfolios?
The instruments we use evolve according to circumstances. At present, we have reduced our exposure to high-yield bonds in favour of investment-grade bonds and high-quality government bonds. To diversify further, we are focusing on structural themes that also meet clients’ expectations. Examples include artificial intelligence, longevity and healthcare, clean energy, climate and the environment, and natural resources. These themes enable us to build portfolios that are better suited to the current environment.
What role do alternative investments play in your asset allocation strategy today?
We are making increasing use of them, but mainly for larger portfolios, due to liquidity constraints. Alternative investments appeal to clients primarily because they offer sources of return that differ from those of traditional markets. They can help improve portfolio diversification and reduce reliance on traditional asset classes alone. They also provide access to investment opportunities less directly linked to listed markets.
How are technology and data analysis transforming your decision-making in the field of investment?
Technology enables us to process volumes of data that we could not manage manually, whether it is to compare securities, map out an investment universe or benchmark portfolios against their benchmarks. Artificial intelligence speeds up our analyses and makes them more comprehensive, but the final decision remains a human one, at least for the time being. Every investment is assessed by our management team, which is now able to compare an instrument against a much broader peer group than before. Portfolio management systems themselves will, over the coming months and years, increasingly incorporate these new capabilities, with features that do not yet exist today.