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December 7, 2024
“It’s worth taking a look”. An interview in the Tagesanzeiger supplement “Future of Finance” about the asset management business with Eduran AG.
«It’s worth taking a look»
Mr. Dubach, the financial industry has had a turbulent time. Around a decade ago, Swiss banking secrecy vis-à-vis foreign countries fell, and with the demise of Credit Suisse, another traditional brand disappeared from the financial center. How has your work as an asset manager changed?
Significantly, the regulatory environment has been tightened during this time, which leads to an increased administrative burden. Market access is made more difficult for us, but new foundations have also become more complex and costly. All in all, the advantages and disadvantages should largely balance each other out. The quality of our service remains the same. However, the loss of a globally active universal bank such as Credit Suisse is a painful setback for the Swiss financial center. In addition to the developments you mentioned, we are also observing a change in the investment world, particularly in the way capital is invested.
What do you mean by that?
In recent decades, there has been a trend towards passive investment strategies via collective investment vehicles such as ETFs. Investors are increasingly investing in indices or thematic funds without examining the underlying individual securities in detail. The focus is more on performance than on substance. It should also be noted that investors who do not hold shares directly forfeit some of their shareholder rights. The financial industry is also a powerful sales sector that promotes ways to encourage investors to bring as much capital to the stock market as possible in the simplest way possible.
In the end, what counts is that the investor achieves a return. Are the details so crucial?
The return is always associated with risk and you should be aware of this so that long-term value growth occurs. We are in a window of opportunity characterized by low interest rates. Since the 2008/09 financial crisis, capital has been available almost free of charge. Then came the Covid crisis, accompanied by extensive fiscal stimulus. Enormous capital flows have flowed to the stock exchanges and have also been channeled into large-cap stocks, primarily through passive investments. Using the example of the 100 largest US companies (S&P 100 Index), it can be seen that the rising share price is also due to a valuation expansion. This is less the case for small-cap stocks (S&P 600 Index), and you pay a lower price for a unit of future earnings.
Another example where detailed knowledge can bring added value is the Gold ETF GDXJ. In 2017, shares had to be sold because the holdings came close to a threshold that would have required a takeover bid. Active investors bought these shares cheaply and added value to the portfolio with reduced risk. Furthermore, in 2022, when interest rates rose, many of the previously highly valued stock market darlings suffered significant price slumps. With President Trump, there could also be movement in the ESG area.
How do you deal with the current environment?
Our approach is independent of the market environment: Find solid values at attractive prices. We specifically select companies with convincing business models, strong balance sheets and robust cash flows. We also like an attractive dividend policy. This strategy makes it possible to hold, expand or supplement positions even during market corrections.
Can’t robo-advisors or similar systems do that today?
I am aware of only a few automated approaches that can take into account the diverse peculiarities of the stock exchanges. In addition, such systems are cost-intensive and often standardized, which limits individual customer needs. We, on the other hand, serve a limited number of customers, which allows us to fully respond to the individual and the customer’s wishes through tailor-made solutions.
How do you see the future of the Swiss financial center and asset managers?
With a liberal order and the protection of property, Switzerland can remain competitive. Nevertheless, there are major challenges for the banking center. While assets are being built up in Asia, for example, the focus in Switzerland is on the transfer of assets. If it is possible to participate in international growth markets, the local financial industry will also benefit. As asset managers, we see ourselves as ‘Financial Butler‘ – the better we know our customers and the more trust they place in us, the better we can guide them through challenging market phases. Solid asset growth requires both: good investment decisions and capital that remains steadfast even in difficult times and seizes opportunities. The consistency of our approach, which has successfully guided the investments we manage through the past 40 years, makes us confident about the future – despite turbulent times.
Eduran AG was founded in 1984 with offices in Zurich, Lichtensteig and Zug and serves private clients as an asset manager.