Published in Investment Europe Magazine, February 2017.
By : Adrien Paredes.Vanheule
“Geneva-based boutique Wealth Solutions Partners (WSP) has been launched in July 2016 by Hervé Croset and Antonio Carballo, former head Global Fund Strategy and senior fund analyst at HSBC Private Banking respectively.
The pair has recently been joined by Philippe Darbellay, former senior fund analyst at Pictet Wealth Management.
All three are involved in fund selection which is one of the four activities covered by WSP with fund advisory, dedicated mandates and portfolio advisory.
During his tenure at HSBC Private Banking where he spent over 15 years, WSP’s co-founder and CEO Hervé Croset tried to convince its former employer to consider the establishment of a spin-off company in order to provide services to external investors.
But HSBC decided to move back all fund selection activities in London in December 2015, leading to Croset and Carballo’s departures.
“The forthcoming implementation of Mifid II will trigger an increase in the use of outsourcing within the financial industry. Wealth Solutions Partners positions itself ahead of the trend. B2B asset management remains a brand new model in the Swiss market as it is not specifically regulated,” says Croset to InvestmentEurope.
He adds that WSP expects a framework for the outsourcing business to be outlined in the Swiss finance law of 2018.
The case for Swiss pension funds and private banks
As a B2B business, WSP targets a diversified range of clients such as financial intermediaries, independent asset managers, family offices, small and medium-sized private banks.
However, Croset points out the situation is slightly different For Swiss pension funds.
He explains that Swiss pension funds are being advised by consultants for their investments but most pension funds are not considered as qualified investors.
Therefore, Croset says, consultants should be granted a license of asset managers by Swiss regulator Finma, a status WSP is not looking for.
Swiss private banks are also among those targeted for outsourcing by WSP but their number swoops down year after year. The firm’s co-founder assesses they face an issue into positioning themselves on the market.
“Swiss market regulator Finma has advised banks to trim the number of nationalities among their clients to 15-20 nationalities in order to comply with anti-money laundering rules. It is an important parameter to take into account in the life of a bank that has CHF5bn of assets under managment split among clients from a hundred different nationalities. Some 80% of its AUM can be impacted.
“In 2015, KPMG predicted that 30% of Swiss private banks would exit the market over the next three years. It is happening. The number of mergers of wealth managers has boomed.
“If we add the weight of Basel III and further Mifid II requirements in the capital of banks, it will be hard to find survivors in the sector. Only Swiss private banks that have had a natural consolidation are less likely to be impacted,” Croset explains.
Looking at niche classes
Regarding fund selection, WSP covers long-only, alternative Ucits, smart beta, ETFs and SRI strategies. It has tied partnerships with fund platforms and analysts to help on fund selection.
WSP targets the establishment of a fund buy list including 200 to 250 funds.
“We have selected partners that are not based in Switzerland in order to avoid any potential conflict of interests. As we are only three, we can only conduct limited number of due diligences. The team is too small. Having contracted with renowned partners for fund searches adds to WSP’s credibility.
“It helps us monitoring new entrants in the asset management industry and focusing on niche asset classes that are not covered by private banks which often tend to invest in mainstream funds. We are trying to identify hidden gems,” argues Croset.
WSP’s chief executive officer highlights liquid alternative funds are soft-closing ever more quickly as investors rush to invest in these strategies because of the low rate environment.
He adds that it is a new situation fund selectors have to cope with but according to Croset, new strategies can emerge in the space at the same time.
Croset does not observe an alternative bubble formed by investors’ inflows but considers this could eventually happen in the event hedge funds turn themselves into liquid alternative Ucits strategies.
“Inflows do not feed the outperformance. One in two strategies in the alternative space achieves real alpha if we set inflows aside,” pinpoints WSP’s co-founder, who assesses there is much to discover on the fixed income segment quoting niche strategies such as senior loans and Cocos.