White label funds – UBS Fund Management Services is benefiting from sustained demand

UBS Fund Management Services (“UBS FMS”) has over 120 employees and is a strategic part of UBS Asset Management, which in turn is one of the four divisions of the UBS Group. Close cooperation with our colleagues in the various UBS client segments is crucial, especially in Switzerland. Our clients mainly consist of asset managers, banks, institutional investors and family offices, each of which is also served by dedicated teams within the UBS Group. Personally, I see being part of the UBS Group as a major advantage, since it allows us to offer a wide range of services from within our own ranks. Some clients explicitly want to have a single-source solution, but we also offer customized services in cooperation with external providers for others. What is key to our business model is that for all issues relating to funds our clients are served by dedicated fund experts directly from the UBS FMS unit that coordinates any additional Group services centrally.

White labelling partnerships tend to be long-term. The relationships with many of our 80 or so white label clients go back years, often decades, and reflect trust and mutual understanding. Before entering into an alliance, both sides have to consider how well they suit each other, and then put the optimal structure in place on this basis in close partnership. For me, it is also important to stay in regular contact with existing clients to ensure we are consistent and deliver what we promise, and to identify developments among our Swiss clients at an early stage and anticipate trends. So I spend a large part of my working week talking to existing and potential clients.

COVID-19 has changed our daily routine, especially when it comes to interacting with our business partners. I'm delighted that we managed to start up new business relationships even during the lockdown. As a unit, we are working at full capacity right now preparing to launch funds domiciled in both Switzerland and Luxembourg. I very much hope, though, that we will be able to have personal meetings again soon (with the appropriate distancing and hygiene measures); in my view, not even the most modern means of communication can match the quality of a face to face conversation.

In terms of assets under management, our Swiss fund management company is the largest in the country, with over CHF 400 billion. More than half of the assets come from our white label clients. So Swiss structures are and remain very important in our home market. However, owing to the fact that the Swiss electorate voted against joining the EEA in 1992 and that Swiss funds often have tax disadvantages for foreign investors, they are mainly used within the country, even under the new legislation.

But many of our clients also have operations outside Switzerland or would like to offer their services to European clients. To meet our clients’ needs we have also been providing our Luxembourg platform to our white labelling partners in Switzerland for more than 20 years. According to the latest PWC Management Company Barometer, our fund management company in Luxembourg is ranked number four, making it one of the largest and strongest in the market. To meet client needs and desires as best we can, if necessary we can also offer our Irish platform, benefiting from the passporting option enjoyed by our Luxembourg fund management company.

In Switzerland we are continuing to see strong demand from institutional investors such as pension funds for their own fund vehicles under Swiss law. This is the result of greater demand for up-to-date corporate governance and flexible implementation of customized investment strategies.
Among domestic banks and asset managers focused on Switzerland, we are still seeing a large number of inquiries about implementing proprietary strategy funds under Swiss law for retail distribution. Without a doubt, one of the reasons for this is the level of interest rates, which is making traditional savings options unattractive, both for banks and for savers. In some cases, on request, we link up our white label offering with individual portfolio management components from UBS Asset Management, where this provides a sensible complement to the client’s investment expertise. The persistent need for both liquid and illiquid alternative investments is reflected in the launch of a contractual fund of this sort (an other fund for alternative investments) and a limited partnership for collective investment (LP).

As a white-label provider, we too are affected by the general trends in investment management. COVID-19 may have shifted the priorities and focus somewhat in the short term, but we still think that the most important drivers of growth are investment management that incorporates ESG factors, the need for efficient passive investment implementation in equally efficient markets, and ongoing strong demand for private market investments.

With sustainable investments, institutional investors are increasingly seeking to have their own vehicles to let them implement a customized investment solution that fits their own values and preferences. For this we work closely with our colleagues in portfolio management, so that we can offer white-labelling solutions that are optimally matched to the client with both active and passive implementation.

Some private market investments have also been heavily impacted by COVID-19, but we are still seeing strong demand. The economic collapse suggests that historically low interest rates will be with us even longer, lending further support to alternative investments that have a low correlation with highly-valued equity markets. We also anticipate assistance for Switzerland as a fund domicile from the Limited Qualified Investor Fund (L-QIF). This is partly inspired by the Luxembourg RAIF, doesn't require approval from FINMA, and allows qualified investors to bring innovative products to market quickly and cheaply. Unfortunately the political process has been somewhat delayed due to COVID-19, so the first Swiss L-QIFS are not expected to be launched until 2022.