Crucial factors such as banking secrecy, diverse investment products and services have contributed to Switzerland remaining a premier offshore haven for the Middle Eastern investors, according to a leading Swiss-based asset manager specializing in the Middle Eastern region.
William Spencer, at WT Capital Management S.A, says there is an increase in demand for wealth management solutions from Middle East region, with a surge in requests for custodian services and tailored structured products. He attributes this to competitive pricing, enhanced return and a wider range of investments products which give Swiss banking a significant edge over regional Middle Eastern banks.
WT Capital Management is a Swiss-based asset manager with a focus on servicing and advising sophisticated private clients with global wealth management solutions.
The company is offering Custody services for private and corporate clients in Switzerland and United Arab Emirates (UAE) and other Arabian Gulf (GCC) states in addition to offering structured product investments tailored to client specification and direct investments in Equities, Bonds, Futures and Forex. It has access to all exchange traded and OTC derivatives markets and alternative investment solutions.
Switzerland has many traditional strengths like political and economic stability, a historical strong positioning in private banking, a high education standard and an above average client service level. These factors and an increased focus on asset management capabilities will keep Switzerland middle term in a good position to remain competitive.
While many investors tend to use the wide range of products and services offered by Swiss banks investors can invest directly in Switzerland either through an actively managed fund, through Exchange-Traded Funds (ETFs) on the Swiss Market Index (SMI) or the SMIM, and besides that, through investing in single Swiss stocks or bonds.
ETFs enable investors to easily purchase a broad basket of assets in a single security, while the iShares MSCI Switzerland ETF, a collective of the country’s most influential companies, and the CurrencyShares Swiss Franc Trust, both offer extensive exposure to Swiss stocks.
According to McKinsey Global Private Banking Survey 2013, the average revenue margin rose slightly in 2011, while the average cost margin fell by 5 bps as banks streamlined middle- and back-office operations.
About 70 percent of assets are still booked offshore though onshore competition is heating up. The Middle-East remains an attractive growth market for private banking. Inflows continue to climb, and profitability is rising. However, competition among private banks is intensifying both among onshore and offshore operators. It said total Middle East wealth (onshore and offshore) grew to US$2.2 trillion in 2012, up 18 percent. The outlook for the region remains positive. It estimated that total High Net Worth (HNW) wealth will increase to US$3.3 trillion by 2015.
Saudi Arabia accounts for about 40 percent of the total wealth pool in the GCC. It is followed by the UAE, Kuwait and Qatar (with about a 22 percent, 15 percent and 12 percent share of HNW wealth, respectively). The product mix for asset allocation has not significantly changed since 2011, but demand for collateralized lending solutions is growing.
The data also shows that most of the asset inflows have been in favor of cash and cash equivalent products (which represent about 54% of AUM). HNW and UHNW clients have maintained high liquidity onshore in order to take advantage of investment opportunities in the region, particularly in real estate. At the same time, the data shows a slight increase in equities and alternative products, a sign of improving confidence in the market outlook.
Most of the assets of Middle East clients continue to be booked offshore in the traditional booking centers of Switzerland. New money is coming from the Middle East. They are happy to go to Switzerland as they have been doing for the last 50 years. Swiss banks are becoming more dependent on wealthy Middle East customers. Most Middle East wealth in Switzerland is held in Geneva. The report said while important families from the Gulf tend to do their commercial banking with banks from their region, they prefer to keep their private affairs separate and offshore.
The Middle East market, according to estimates by Boston Consulting, contains $4.5 trillion of private wealth.
