Black or White How Risks Become Opportunities

68 Pages·2017·5.12 MB·English

Scope
CREDIT SUISSE ASSET MANAGEMENT (SWITZERLAND) LTD.
Q2/2017
Security & Safety
Black or White
H ow Risks Become
Opportunities
06 The Scope Interview 42 Investment Solutions 48 Investment Solutions
How to Rethink Returns Benefits in Bulk Supply Chain Finance
André Helfenstein on What makes multi-factor Specialized funds enable
the challenges and solutions index funds attractive short-term, low-risk investments
for pension funds with attractive returns
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Leader in Digital Security
www.airlock.com
Editorial
Security
Megatrend
Are you familiar with the fear of crime paradox? It asserts that some
people are very afraid of crime, although they are not particularly threat-
ened by it, whereas other people have no fear of it, even though their
threat is above average. Recognized some years ago, this paradox was
confirmed in 2017 in a security survey conducted by ETH Zurich. Overall,
the results of the survey are very gratifying. Nine out of ten Swiss people
feel secure.
However, security isn’t a condition. It’s a value. This means that security
also comes at a price. And that – in simplified form – is a key theme
of the second issue of “Scope.” We show you how the increasing global
demand for solutions to security and safety is becoming a megatrend
and leading to interesting investment opportunities. We also address the
challenges the Swiss pension system is facing. The 2017 Credit Suisse
Pension Fund Survey makes clear how urgent the need for action is. As
Credit Suisse Asset Management, we have the expertise to support pen-
sion managers through words and deeds. This includes specific solutions
Eric Varvel
Global Head of Asset Management such as investing in the Swiss energy infrastructure and Index Solutions.
Our article on Supply Chain Finance will give you insight into how we help
CFOs of suppliers and other companies to gain an edge through this
innovative concept. It enables suppliers to receive payment immediately
after delivery of goods, while at the same time granting buyers a longer
payment period customary for the industry and country. Credit Suisse
Asset Management has launched a fund that invests in Supply Chain
Finance programs, allowing investors to invest their funds on a short-
term basis, similar to the money market, and achieve attractive returns.
I wish you an enlightening read.
Eric Varvel
Scope | Q2/2017 3
Contents
Security & Safety
Security
Megatrend
Funds for a more secure, healthier
and cleaner world are benefiting
from the global demand for innovative
security and safety solutions.
Contents
Editorial Topical articles
03 Security Megatrend 06 How to Rethink Returns 34 Pay Securely? Yes, You Can!
The growing global demand for Interview with André Helfenstein How Swisscard is combating fraud
security is leading to interesting
12 Can We Expect a Trend Reversal 36 Energy Industry in Turmoil –
investment opportunities
with Bond Yields? Opportunity for Credit Suisse
Pension funds need to restructure Energy Infrastructure Partners
their portfolios Interview with Dr. Walter Steinmann
14 “The pace of change creates 42 Premium Investments
opportunity in Asia” Index Solutions
In conversation with Michael Levin
48 Good Mood Included
20 Supertrends Supply Chain Finance
Angry societies – multipolar world
52 “SMEs are close to my heart”
24 Risks Are Opportunities Interview with Lex Greensill
Fund for a safer, healthier and
56 “When the Eyeball Is Too Long”
cleaner world
Burkhard Varnholt on demographic
30 “Hackers have to think and developments, the challenges for
behave like criminals” pension funds and the shortsightedness
In conversation with Ivano Somaini of investment strategies
4 Scope | Q2/2017
Contents
The Scope Interview Investment Solutions
André Helfenstein Premium Investments
Head of Institutional Clients Index Solutions
Pension funds have to compensate With multi-factor index funds investors
for today’s low return expectations by can keep costs in check, diversify their
expanding the investment universe, portfolio and achieve excess return
even when this leads to higher invest- over longer periods.
ment risks. André Helfenstein explains
what Credit Suisse is doing to support Investment Solutions
institutional investors.
Good Mood Included
Supply Chain Finance
Trade receivables are a still relatively
unknown asset class that, similar to the
money market, enables investors to
invest funds on a short-term basis and to
achieve significant returns.
Miscellaneous Legal information
Subscribe to “Scope”
62 Dr. Stefan Frei 67 Disclaimer/ Read “Scope” in
Cyber security important information e-paper format for tablets or
65 Take-away in magazine form.
Rainer Lenzin was appointed
Head of Credit Suisse Asset Management
Distribution Switzerland in April 2017
66 Contact
Imprint
Sources

credit-suisse.com/scope
The “disclaimer/important information” at the end of this publication applies to every page of the document.
Scope | Q2/2017 5
The Scope Interview
André Helfenstein
André Helfenstein took over as Head of Institutional Clients
at Credit Suisse in 2017. Previously, he was responsible
successively for Private & Wealth Management Clients, Zurich
Region and Corporate & Institutional Clients. Before joining
Credit Suisse in 2007, he was at Boston Consulting Group in
Zurich and New York for 12 years, ultimately as Partner &
Managing Director. He is a member of the Executive Board
of Credit Suisse (Schweiz) AG and of the Management
Committee of the Swiss Universal Bank Division.
6 Scope | Q2/2017
The Scope Interview
How to Rethink
Returns
Interview with André Helfenstein
Head of Institutional Clients at Credit Suisse
As Head of Institutional Clients, André Helfenstein is confronted
with the strategic challenges of the pension funds every day. He is
convinced that the low return expectations for low-risk investments
must be compensated by expanding the investment universe – even if
that leads to higher investment risks. In the following interview,
Helfenstein explains how Credit Suisse goes about advising and sup-
porting the pension funds.* In this context, Global Custody Solutions
and Private Label Funds have an important role to play.
* The statements in this interview are based on the Credit Suisse Pension Fund Survey published in May 2017.
Scope | Q2/2017 7
The Scope Interview
Mr. Helfenstein, what is the signifi- What do you currently see as the ensure that the overall solution is con-
cance of the (new) Institutional greatest challenges for the Institu- sistently applied, whether that’s to invest-
Clients business area for clients? tional Clients business, and how ments, Global Custody, Private Label
André Helfenstein: Together with the are you responding to them? Fund structures as well as trading and
Private Client business and the Corporate The greatest challenges are undoubtedly FX management. Finally, we are also
Client business, the Institutional Clients demographic change and the low interest investing comprehensively in our IT plat-
business is one of the three pillars of rate environment. Both of these issues form, investment and risk analytics
Credit Suisse in Switzerland, and conse- have massive implications for the struc- and our reporting.
quently for us a key business area. As ture of pension funds, the skills required
we see it, the primary advantage for our to successfully invest in global financial How do you estimate the growth
5,000 institutional clients is that we can markets, and the need to invest in asset opportunities for the Institutional
support them from a single point of con- classes and solutions that represent new Clients business over the next
tact, invest specifically in our institutional territory for some of the pension funds. five years?
solutions and services, guarantee our Accordingly, we are supporting our clients The Swiss Institutional Clients business
local presence in eight regions and work by continuously expanding our solutions represents an absolute top priority for
closely with our Asset Management and and services to include new asset classes Credit Suisse. Moreover, we are con-
Investment Banking divisions. and products. Moreover, we advise our vinced that the business will continue to
clients from one point of contact to develop very positively over the next
8 Scope | Q2/2017
The Scope Interview
“Most pension funds have adapted to the
low interest rates by adjusting their investment strategy
and subsequently reducing the proportion of bonds
from over 40% to 31%.”
few years. The needs of clients are be- Are these kinds of changes to 5.5% and the technical interest rate
coming more complex in every respect, already evident? to 2.0%.
and all segments in the institutional busi- Yes. In the Credit Suisse 2016 Pension
ness are steadily consolidating. As the Fund Survey, 60% of participants re- How does Credit Suisse support
market leader, we are convinced that we ported having altered their investment the pension funds?
stand to profit from these developments. strategy. The proportion of bonds was The most important thing is to under-
To that end, we are striving to work to- reduced from more than 40% to an es- stand the strategic asset allocation and
gether with our clients for the long term timated 31% at present. In contrast, to demonstrate how risks and returns
and to achieve mutual success. allocation to equities increased to 30% can be better optimized. Based on this,
and real estate to nearly 19%. solutions are implemented individually by
Pension funds are facing hard means of asset management mandates,
times. How are you experiencing One challenge is also the fact as well as funds and Investment Foun-
this investment environment? that beneficiaries are living longer dation products. To enable our clients to
We are very pleased to note that in- than ever. monitor and control the success of their
vestment returns for the last year were Yes. The increasing life expectancy investment decisions, we support them
generally positive, which was reflected means that the accrued insurance cover through cutting-edge Asset Servicing
in an average return for pension funds must last for a longer period of time, so solutions.
of 3.9%. The first quarter of 2017 also pensions are actually falling. When the
produced positive returns amounting to obligatory BVG (2nd pillar) was intro- Asset Servicing is also your respon-
2.1% on average. But occupational pen- duced in 1985, a fund had to pay out a sibility. What is the significance
sions are facing significant challenges. pension over a period for 15 years. In of this area for institutional clients?
Low, and even negative (in Swiss francs), the meanwhile, it’s already more than Asset Servicing comprises all of the
interest rates are making investment de- 19 years. services that make it possible to offer in-
cisions much harder. That in turn means stitutional and professional investors
that it is increasingly difficult, if not im- Does that mean that the service efficient administration and monitoring
possible, to achieve the necessary returns profile of the pension funds also has of their financial assets. Chief among
employing an investment strategy that to be adjusted? these services in this case are Global
is based on bonds. Of course. Adjustments are urgently Custody, Investment Reporting and
needed to guarantee the long-term finan- Private Label Fund solutions, which are
Will the low interest rates continue? cial equilibrium of the pension funds. That precisely tailored to the specific needs
A return of interest rates to the high includes lowering the technical interest of the client.
levels of the past seems rather unlikely rate and the conversion rate, raising the
even in the medium term. retirement age and increasing premiums What challenges do
to cover risks and associated costs. institutional clients face in the
What does that mean specifically? area of administration?
Pension funds need to reorient their Have pension funds taken First of all, the general conditions of the
thinking and endeavor to compensate the such measures? last few years have meant that pension
low expectations for low-risk investments Yes, some have acted. Based on our funds have been paying even greater
by expanding the investment universe to survey, the conversion rate has been attention to the costs of administration.
cover the global market as well as all as- lowered from 6.8% in 2010 to 6.2% At the same time, however, the regula-
set classes, even if that leads to higher at present. During the same period, the tory and legal requirements as well as the
investment risks. An important point to technical interest rate was decreased pension fund industry’s own demands
emphasize here is that the assets must from 3.5% to 2.5%. Over the next five with respect to timely oversight and moni-
be accurately matched with the liabilities years the pension funds are planning toring have increased significantly.
(see also the report on page 12). a further lowering of the conversion rate
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance. Scope | Q2/2017 9
The Scope Interview
“A clear trend toward a decrease in
nominal value in favor of tangible assets
is also evident.”
How specifically can Asset Servicing You stress Investment Reporting. the last seven years, the volume has
solutions help here? Why is that so important? more than doubled.
Global Custody refers to a way of allow- Investment Reporting plays a central role
ing clients to reduce their administrative because it serves as a significant risk What is Credit Suisse doing to help
activity – for example, investment report- management tool for the client and es- prepare the Foundation’s trustees
ing, monitoring investment guidelines and tablishes the analytical basis of support for the increasing challenges they
investment accounting – to a minimum for investment decisions. By means of are facing?
by handing it over to a single Global Cus- online reporting, clients can maintain an For quite some time Credit Suisse
todian, enabling them to take advantage overview of their portfolio’s assets at has been offering a successful training
of economies of scale and a cost-effec- all times, the performance of their invest- program for Foundation trustees. This
tive solution. Our specialists make sure ments compared with their overall strat- is conducted by a team of Relationship
that our solutions are oriented toward the egy and the risks associated with their Management specialists. Beginning this
client’s specific portfolio structure and strategy. In addition, even more detailed year, we are offering part of this training
processes – in particular Investment information is possible, for example, de- through the Pension Fund Academy, an
Reporting. termining the performance contribution innovative online course. In this way, ev-
of the individual decision stages within ery Foundation trustee can acquire more
the investment process. In recent years know-how anywhere, anytime. We have
specialized analyses, such as focused also included a practical day to expand
reports on private equity exposure, have and deepen the knowledge gained.
also become more important.
Mr. Helfenstein, you are also a
What other solutions does member of the board of the Tonhalle
Asset Servicing offer? Society of Zurich. How important
In addition to Global Custody and Invest- is music to you?
ment Reporting, we also offer Private Music and contact with the music world
Label Fund solutions. These solutions are very important to me, even though
are custom-tailored to the specific re- I don’t play an instrument myself. My in-
quirements of clients. Clients may, for volvement with the Tonhalle is a source
instance, be pension funds, insurers, of great joy to me. I am very eager to see
Conversion rate and technical interest rate
The conversion rate converts the assets ac- banks, asset managers, family offices or how the conversion of the Maag site into
crued in the pension pot of each individual ultra high net worth individuals. Private a temporary concert hall will be received
to an annual lifetime pension upon retirement. Label Fund clients contribute their al- by the public.
The pension fund experts must make as-
ready-held securities to their own collec-
sumptions about the expected duration of
the pension payments as well as on the tive investment scheme. In so doing,  May 2017
expected return on the residual capital. This they benefit from even greater relief and
expected return is termed the technical increased governance by delegating the
interest rate. full responsibility for complying with ever
more comprehensive legal and regulato-
If these two parameters are set incorrectly,
ry requirements to the fund management,
the available pension capital will not be
sufficient to finance the pensions. In this which is monitored by FINMA.
case, the active insured must step in and
make up the difference. This leads to an un- How extensive is this business?
intended redistribution within the 2nd pillar,
We currently have over 640 such funds
from the active insured to pension recipients.
under management. That amounts to
Credit Suisse estimates that this redistribu-
tion amounted to CHF 5.3 billion in 2015. assets of more than CHF 300 billion. In
10 Scope | Q2/2017