Pictet Funds' CEO, Laurent Ramsey, is one of those rare breeds of visionaries who believe that when life gives you lemons, you should make yourself a lemonade. As a result, one of Switzerland’s biggest banks and financial service providers has managed to adapt well to the current financial landscape with all its bumps, twists and turns and with that it is turning a new leaf in its history.
Banking secrecy no more
In 2006, Pictet Funds made an interesting decision, one that it tried to resist ever since the company’s founding back in 1805 – it merged its asset management and private banking units in the same building. The company moved its headquarters to Geneva and that created the perfect opportunity for this blissful union.
Laurent Ramsey admits that this change now allows Pictet to provide its clients with more transparency. Ramsey who is heading the global distribution unit of Pictet and is also CEO of the company, says that this new client-focused strategy needs to be adopted by the entire private banking industry in the country. The chief executive believes that by doing so private Swiss banks will show the world that, contrary to the popular belief, they are not offering a cover or a shield for foreign millionaires and billionaires who have a great portion of unexplained wealth or who are looking to reduce or evade taxes.
According to Ramsey, now more than ever, clients expect banking transparency in terms of both performance and investments. Pictet’s CEO is confident that by putting the company’s private banking and asset management units under the same roof, the company has successfully adopted a more transparent style of work.
The results of that move can already be seen. Despite the crisis, Pictet Funds grew its managed assets and it started to enjoy a higher market share. The company relied on money market mutual funds and emerging market debt funds and it witnesses inflows with a value of EUR 7.6 bn (USD 10 bn) and it scored total client monies of about USD140. All of that Pictet did in 2012 alone.
Pictet Funds’ strategy diversification included:
• Thematic investing (mainly in the luxury brand, biotechnology and timber industries)
• Long-short credit
• High-yield credit
• Corporate bonds
That allowed Pictet not only to keep its head over the water during the stormy post-crisis period but to also sail at full speed towards the horizon of new opportunities.
Swimming against the currents
The 2008 financial crisis plays a key role in Pictet’s new strategy. With Ramsey’s assistance, the company refused to follow in the steps of many of its rivals who did the impossible to hide from the rain. Pictet Funds choose to swim against the currents and to dive into the stormy waters headfirst. It opened various multi-currency money market funds which attracted some of the clients of big-gun competition – the likes of UBS and Credit Suisse.
When a period of sustained market increases finally kicked off in the second half of 2009, Pictet solidified its relationship with its new clients. It slowly introduced them to credit markets and turned the yield curve into emerging market debt and later into equities. The result – money market allocation that is registered among the fund clients of the company has reached 25%.
Pictet’s main fund flows are now boosted by its wide bank network. The company now works with clients from all over the world and it has offices in 17 different countries. Now when the post-crisis banking environment has started to stabilise, banks have started to move clients’ assets back to mutual funds.
The rules of the game may be about to change
The challenges ahead of private banking organisations, however, are still not over. Laurent Ramsey believes that the discussion related to the ban on inducements which is now being led by regulators may put a strain on companies that use the open architecture model. That is because proprietary financial institutions that have fund managers of their own will stop offering third-party services and products and they will focus their efforts on selling only their products.
How will new regulations affect the industry and the clients
Pictet Funds’ CEO warns that if such a regulation comes into force, the fees for end clients can greatly increase. According to Ramsey, advisory fees may also jump. As a result, only the wealthiest of banks’ client will be able to seek professional advice.
Pictet’s chief executive predicts that institutions will try to adapt to this regulation by opening up to a FOF (fund of funds) strategy. In other words, clients’ assets will be allocated to products selected by the institution itself. Sub-advised funds may also become a common thing. If that happens, the assets of clients may be held by one management team but can be managed by another.
If the new regulation is approved, Ramsey states that it can weaken the entire industry. Pictet’s CEO adds that the ban will make things such as distribution, operations, client access and custody more sluggish.
Even though Laurent Ramsey may be concerned about the potential regulations, his main goal and ambition remain unchanged – namely, to turn Pictet into one of the best asset managers in Europe. To make that possible, the company’s CEO is planning to focus on high performance and top quality rather than on mere profits and company expansion.