1
International Banker is joined by Mr. Daniel Varela, Chief Investment Officer of Piguet Galland & Cie SA to discuss trends in Swiss asset management, the bank’s asset-management model and most popular investment products.
—–
Today, International Banker is joined by Mr. Daniel Varela, Chief Investment Officer of Piguet Galland, to discuss trends in Swiss asset management, the bank’s asset-management model and most popular investment products. Daniel, very good to have you with us today. It’s been just over a year since the failure of Credit Suisse and its government-brokered acquisition by UBS Group. Do you believe that the reputation of Swiss banking has fully recovered one year on? And if not, how can the sector fully restore its appeal?
Well, first of all, thank you for inviting me. It’s clear that Swiss banks’ trust has been shaken by the financial difficulties of this major bank. And I think that this trust has been undermined even more abroad, where esteem towards Swiss banks has always been very high. But the swift intervention of the Swiss government and the central bank probably was a good decision to restore confidence. Also, there is a project to enforce capital requirements so that it will be applied to Swiss systemic banks, and this should help also restore the reputation. Personally, I do think that the Swiss banking sector should preserve its strengths in the future by concentrating on asset management and quality of service while staying as far away as possible from high-leverage activities, like investment banking.
So, Piguet Galland is owned by the Banque Cantonale Vaudoise, BCV Group, which has a double-A credit rating. Does having a parent company with such high credit quality provide distinct advantages in investing and asset management compared to your competitors?
Well, of course, being owned by a very large bank with such a high rating is something very useful for us. We like to say that we are something like the best of both worlds—being owned by a very large and very well-capitalised bank, but at the same time, we are a human-sized bank that can offer tailormade services to its customers. So, of course, this is a really good thing to have a very strong company like BCV.
And what are some of the most popular investment products, markets and asset classes with Piguet Galland’s clients in 2024? And why are they creating so much interest?
So, the trend that we have had since the beginning of the year is probably the same trend that we had over the last few years in Switzerland but also in our bank. So, mainly, the first trend is obviously sustainable investments. So, we have a growing business on that front. We have fully integrated sustainability into our investment strategies. And this is also something that is proving very helpful to attract clients. The second trend that we have in Swiss banking, but also Swiss asset management, but also at our bank, is the development of private assets. So, for a very long time, it has been reserved to institutional investors but also very wealthy clients. Now, the trend is to propose these private-equity and private-debt solutions to a more wider range of clients. This is something that we are doing also at Piguet Galland by working with external partners.
Now, you’ve already mentioned quality of service, Daniel, and Piguet Galland strongly advocates for hybrid models bringing human and digital inputs together. As such, do you see the bank’s further appetite for digitalisation threatening this model, with humans perhaps playing a diminishing role as demand for digital solutions grows?
We think that for private banks to be able to attract wealthy or ultra-wealthy clients, they need to embrace the digital revolution. So, first, digitalisation must help companies, banks, must help banks to automatise their processes. But it’s something also that should enhance the customer experience and their access to information and advice. But the idea is not to get rid of humans but to be able to relieve our advisors from very low-added-value tasks so that they can concentrate on their relationships with their clients.
So, it’s about the bank getting the processes right, isn’t it, to make life easier for everybody on both sides of the equation?
Absolutely. And concentrate on the customer service.
Now, what can you tell us about the types of institutional investors that most commonly invest with Piguet Galland? Are there any major commonalities among them, like specific industries, typical size or particular net worth? And what are some of the most popular investment products with your institutional clients?
So, Piguet Galland, or, in Switzerland, when we speak about institutional clients, in fact, it’s pension funds and insurance companies. These players manage almost all of the retirement money that will be paid to people when they retire. And except for the very large companies, most pension funds in Switzerland, they are not really equipped to manage these funds. So, they go towards companies like banks like ourselves to give mandates so that this retirement money is managed to be able to pay for retirement pensions. The products that we have, it’s mainly for people, for investors, institutional investors that believe in the virtues of active management, which is the opposite to passive investing. So, these clients, they believe also in our ability to outperform over the years with an amount of risk that is affordable.
Daniel, approximately what proportion of Piguet Galland’s investment strategies today contain an ESG component? And what’s the single biggest challenge to integrating ESG into an investment portfolio?
Well, we have fully integrated investment, responsible investment, into our investment-process decision. So, I would say that nearly all our investment strategies incorporate at least one ESG component, as we apply an exclusion filter across our entire investment universe. The biggest challenge is, because, aside from traditional asset classes, like equities and bonds, there are other asset classes that we use in our models—like, for example, commodities and alternative investments—where we don’t have the necessary data or the methodology to really incorporate that into our investment portfolio. So, this is the real challenge.
Now, regarding the bank’s investment model, how focused are you on local markets vis-à-vis international markets? Would you say there’s much temptation for the bank to broaden its investment options by embracing more global market exposure than is currently the case? Or is there much pressure from clients to look more globally?
Well, first of all, almost 80 percent of our customers are living—either Swiss or living in Switzerland. So, I would say that there is a natural bias to invest locally. But the local market in Switzerland is quite narrow and very defensive, so if you would like to improve your prospective returns, it’s interesting to look to international markets. We at Piguet Galland tend to recommend a broad diversification across international markets. But there is a problem. The problem is that when you invest internationally, you have the strength of the Swiss franc that can lower the returns that you can obtain by investing abroad. So, this is something that we take into account in our investment policy, and most of the time, we tend to hedge the currency dynamically.
So, how important is having a disciplined approach to risk to Piguet Galland’s asset-management model? Can you provide any insights into how the bank’s risk model functions in practice in relation to the bank’s ultimate investing decisions and, of course, recommendations?
So, for us, risk control is not a result of a quantitative approach; it’s more a matter of common sense. What we do is a very disciplined and structured approach. We perform a very comprehensive analysis about macroeconomic trends but also about each asset or each company in which we invest. The idea is also to really understand the risks we take by investing in each of these companies or each of these assets. And with the idea of not adding up risks.
Now, you mentioned pension funds earlier. Just over a year ago, the bank launched two multi-asset LPP occupational pension funds—that is, Swiss franc (CHF)-denominated products—which are typically popular with Swiss pension funds. Now, these funds partially invest in alternative investments. What are some of the most common alternative products in which these funds and possibly other Piguet Galland funds invest?
Okay. So, these funds, the launches of these funds were a real success. The idea for these funds, the prospective clients are not only pension funds. It could be also private customers, like entrepreneurs, who need to build retirement capital very effectively. So, this is the product for them. And, of course, we do invest these funds across traditional asset classes, like equities or bonds, of course. But, as you mentioned, we try to diversify as much as we can so that we can effectively enhance the returns that we are looking for over the years. So, the less traditional asset classes are, for example, commodities, real-estate funds or even hedge funds.
Now, after years of interest-rate hikes, the Swiss National Bank (SNB) announced its first rate cut in March—25 basis points to 1.5 percent. Now, do you expect more rate cuts to follow this year? And, if so, what are some of the most significant ways this more accommodating monetary policy would influence what is popular with or what you recommend to your clients?
As you mentioned, the Swiss National Bank, among all central banks of developed countries, was the first central bank to cut. And what made this possible is the fact that Swiss inflation did fall sharply over recent months. And it’s now close to 1 percent. So, the idea also for the Swiss National Bank is to limit the strength of the Swiss franc, which has been very, very strong over recent years and did have a strong impact on the competitiveness of the export industry. So, the idea is to decrease this appreciation. It should have a good impact on the export industry. We think this is not the last cut. It will probably, we probably expect two more cuts this year. And this, of course, will help the export industry. And in terms of financial markets, this is something that is good news for equities but also for bonds.
Okay. Now, if I’m not mistaken, you’ve been with Piguet Galland for 25 years, having joined in 1999, when it was known as Banque Piguet & Cie. What’s the most significant difference in the bank’s internal culture between then and now? And do you prefer the working culture of today? And if so, why?
So, our culture has clearly changed for the better. But developing a corporate culture that leads to success is no easy task. This is the reason why we have been committed to corporate social responsibility for the past several years. What we want to promote is the development of staff skills and their employability. And what we want to promote also is equal opportunities and diversity within the bank. So, these initiatives seem to be bearing fruit because we’ve been awarded a label called Fair on Pay Plus, which is a label that certifies that a very high level of equal pay is within the company. But, also, we’ve been awarded a prize called Best Workplace in Switzerland. And this does reward Piguet Galland for its excellent work culture.
Great to get that insight. And thank you very much for your time today, Daniel.
Thank you.
