In our last post "Swiss Asset Management has a Unique Story", we showed that market return is the major difference in AuM growth between North American, Swiss, and European asset managers. We now look at this in more detail.
We identify two factors explaining the difference in market returns between the regions:
The performance of the different asset classes
Home bias drag for Swiss and European managers
This first slide shows the asset allocation grouped into seven major asset classes.
Focusing on the two largest asset classes:
North American managers have the highest allocation to equities - equites have had the highest returns over this 10-year period, despite their higher volatility.
Swiss managers have a high allocation to fixed income and its lower returns. European managers have even more.
Overweighting to poor performing asset classes is however not the only reason for the lower market returns of Swiss and European managers…
The second slide, below, shows the annualized returns per region of the two largest asset classes: equities, fixed income. North American equities outperformed Swiss and European equities. The returns for fixed income are lower but tell a similar story: North American fixed income outperformed European and Swiss fixed income.
Swiss and European managers – to the detriment of their clients, and thereby to themselves as well – appear to suffer “home bias”.
Combined, the two factors explain the majority of difference in market returns between regions, but not all.
What’s your opinion? What factors explain the residual difference? Fees, active management, asset class churn, something else…? Leave a comment below.
Big thank you to The Good Guys Company (TGGC) for their collaboration and thought leadership.
Download the full report "Swiss Asset Management on the Global Stage".
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