Credit Suisse: clients return to funds fold

Mutual funds are making a comeback among clients of one of Switzerland’s leading wealth managers. In 2003 and 2004, Credit Suisse, which has SFr564.3bn (?368bn), focused on providing products structured on commodity and equity indices, with capital guarantees, to satisfy its twitchy client base.

But things have changed in 2005, with a renewed client interest in mutual funds, says Burkhard Varnholt, head of the Financial Products and Investment Advisory team at Credit Suisse. “I am expecting fund products to come back into their own, and we can already see clear patterns relating to the market environment,” reflects Mr Varnholt.

He reports keen investor appetite for both actively managed thematic equity funds and well-run fixed income products. His advisers are recommending, among others, funds investing in water, luxury goods and energy. Preferred providers of themed funds include Clariden, Fidelity and Pictet.

“In the 1990s, people were focused on funds,” says Mr Varnholt. “During the bull market, funds are more sought after by investors, who opt for active management and the ability to outperform indices. In a bear market, there is increasing demand for structured products, as they can provide cheap protection and investors are willing to give up some performance in return for this.”

Like his counterparts at rivals UBS, he is reluctant for clients to go out of house for fixed income. This is not surprising, as bond management is one of the biggest profit generators for his sister company Credit Suisse Asset Management (CSAM), which currently runs ?40bn of the bank’s private client portfolios.

There is no preference for internal channels of manufacturing, claims Mr Varnholt, who was the architect of the Fund Lab self-service product selection supermarket: “We always start with open architecture when sourcing a product.”