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Swiss-based asset management firms grow more positive in their economic outlook

Wednesday, December 02, 2020
Opalesque Industry Update - Investment experts working at Swiss-based asset management firms are much more positive as regards the outlook for Switzerland's economy than they were six months ago, according to the latest Swiss Asset Managers' Survey conducted by AMA. A majority believes that Switzerland will emerge stronger or at least escape long-term damage thanks to its solid position going into the crisis and its attractive sector structure. The turmoil in the financial markets resulting from the pandemic has further accelerated the trend toward sustainable investments.

Economy and geopolitics

The greatest risk for the Swiss economy remains the global economic downturn triggered by the coronavirus crisis and the measures taken to control it. However, the economic outlook has improved significantly. Almost 80% of the investment specialists surveyed view the recovery from the slump due to COVID-19 as stronger than or roughly as strong as expected. Many respondents also think that Switzerland will benefit from the crisis over the long term. Our country's attractive mix of sectors, low debt, and generally high level of competitiveness suggest that it could emerge stronger from the pandemic. A majority of those surveyed correctly predicted that Joe Biden would win the US presidential election, with just under a quarter tipping Donald Trump. Slightly more than half of the asset management experts, meanwhile, expect Biden's presidency to have a negative impact on the financial markets.

Sustainable investments

For a majority of the investment specialists surveyed, the financial market turmoil caused by the coronavirus crisis was a catalyst for sustainable investments. Sustainably managed companies proved to be more resilient on the whole, so their investors were able to withstand the crisis much better than they would have with conventional, non-sustainable investments. This view is backed up by the fact that high inflows into sustainable investments were set against outflows from non-sustainable ones. Some 62% of all the asset managers taking part in the survey are already investing more than a quarter of their assets under management sustainably. This represents a further increase of around ten percentage points compared with the previous survey. At the same time, the proportion of asset managers investing less than 10% sustainably has declined sharply again.

Financial markets and asset allocation

After a rather downbeat assessment of the Swiss stock market in the spring survey, the investment experts are now almost unanimous once more: four out of five expect a positive return in the next 12 months. Hardly anyone is forecasting a further sharp correction. The outlook for the euro (EUR) has finally shown a significant improvement, with 42% of respondents anticipating that it will firm up against the Swiss franc (CHF) over the next 12 months. This is the most positive assessment to date of the EUR. The US dollar (USD), on the other hand, has fallen out of favor with the investment experts. The record-high budget deficit and sharply lower long-term interest rates in the USA are detracting from the USD's appeal. While the stock markets have already staged a marked recovery from their slump earlier in the year, both equities and alternative investments are still very popular with investors. Meanwhile, only a small number are planning to increase their allocations to bonds and cash.

Monetary policy

The Swiss National Bank (SNB) continues to enjoy considerable support among the asset management specialists surveyed, although the percentage who approve of its current monetary policy has fallen since the spring to 84%. Whereas not a single survey participant wanted the SNB to be more restrictive back then in the midst of the financial market slump, a minority now believe that the time has come for monetary tightening. This is also reflected in interest rate expectations. In the last survey, hardly anyone was expecting the SNB's negative interest rates to be lifted in the next three years, but almost one in three now thinks that they will. It is interesting to note the expectations regarding global inflation after governments and central banks took ultra-expansionary action in response to the pandemic. A third believe that we will remain in an environment of low inflation or even deflation. Another third are of the opinion that the "official" inflation rate, measured using a basket of goods and services, will stay low, but the above-average rate of inflation in asset prices will persist. Finally, three out of ten think that the central banks will succeed in keeping inflation within their target range.

Outlook for the asset management industry

The outlook for the asset management industry has improved markedly. The pessimists held sway like never before six months ago, but now the percentage of optimists is at a record level. One in three expects revenues and/or margins to grow, and a further 51% see the outlook as stable. This turnaround in sentiment can probably be attributed to the strong recovery on the financial markets and increased demand for savings and investment solutions due to the crisis. Expectations with regard to employment in the asset management industry have also improved. Hardly anyone is expecting staff cuts, while one in three anticipates an increase in their company's headcount over the next 12 months. This positive outlook could be explained by the fact that respondents rate the performance of actively managed investments during the crisis as better than that of passive products. Active management not only requires more staff, it is also more profitable.

Press release

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