Wegelin emerges as Switzerland’s best-kept secret
The country's oldest bank has become a haven for investors seeking shelter fromt he credit crisis
Wegelin & Co is not a name normally heard outside the circles of Swiss private banking.
But it is name being heard more and more in the wealth centres of Geneva and Zurich, frequently mentioned in the same breath of the acknowledged titans of Swiss wealth management like Pictet, Julius Baer, and even UBS.
In fact, Wegelin is Switzerland's oldest bank, founded in 1741.
"Wegelin is one of the most dynamic wealth managers of the moment, attracting clients at a faster pace than many of its competitors," said Michel Derobert, secretary general of the Swiss Private Bankers Association.
The bank's low profile probably has a lot to do with where it is based - in the small Swiss town of St Gallen, population just over 70,000, and situated in the far northeast corner of Switzerland, closer to Germany and Austria than Zurich.
But Wegelin believes its location gives it many advantages over its competitors.
"Not being in a financial centre means that it is easy to avoid the deadly emotions of greed and fear. After all, the world's most successful investor Warren Buffett is based in Omaha and not New York," said Magne Orgland, one of the bank's unlimited liability managing partners.
Wegelin has also developed a strong relationship with the town's university, which Orgland said is regarded as the leading centre for the study of business and finance in the German speaking world. Graduates of the university also provide a ready stream of employees for Wegelin.
The bank's location has not appeared to have deterred the rich from depositing their money with Wegelin. Last year assets under management increased to SFr20.6bn, a rise of 23% over the year before figure.
Wegelin has also benefited from the credit crunch as many rich clients look for security and a bank they can hopefully trust.
"Unlimited liability partnerships like Wegelin are gaining market share from the bigger wealth managers as many clients feel their money is safer with them as the management will feel the pain just as much as their clients would in any financial downturn," said Derobert.
Wegelin has eight managing partners, all signed up to take full responsibility for any downturn in the bank's fortunes.
The structure of the bank was altered in the early 1990s when Konrad Hummler, a managing partner, led a management buy-out from its family owners. The bank's managing partners and staff now own 80% of the bank, whereas the Wegelin family now only control 20%.
"This effectively ushered in the modern period for Wegelin with the introduction of the latest portfolio management theories and the first structured products," said Orgland.
Wegelin is now the biggest active quant house in Switzerland and controls around 40% of the Swiss market for structured products.
A strong adherence to quant-based investment processes appears to be paying off. The bank's flagship fund, its active indexing global equities strategy, has generated a cumulative return of 169.8% since inception in December 2001, compared with the MSCI World Net Total Return Index return of 62%.
The bank currently has SFr1bn invested in single hedge fund strategies, although none of these are credit-based and existing strategies have very little leverage, said Orgland.
Wegelin has also avoided investing in funds of hedge funds, despite their popularity among many Swiss wealth managers.
Orgland said the bank has been able to thoroughly modernise its investment processes but at the same time adhere to its traditions learn from being Switzerland's oldest bank.
"The bank combines client servicing with modern financial theory," he said.
The bank was founded by Caspar Zyli, a prominent merchant in the town's then thriving textile industry. Unlike many of its original competitors, the bank survived the Napoleonic Wars intact and in 1893 it gained its current name Wegelin & Co from Zyli's newphew, Emil Wegelin-Wild, who was elected partner in 1860.
With so many years behind it, Wegelin thinks its gets client servicing right.
"All wealth managers talk about being client focused, but what does it actually mean. Nearly all large wealth managers have product sales targets for their relationship managers, we don't," said Orgland.
This is also helped by an extraordinary staff retention record. Since the management buyout not one client advisor has left to join a competitor, said Orgland.
"We have a joke at Wegelin that there are only two ways of leaving the bank as a relationship manager - retirement, or death," he said.
Around 60% of the bank's current private banking clients are based in Switzerland and Wegelin has actively being opening offices throughout the country in recent years. Last year it opened an office in Geneva and Locarno, which followed on from Basel the year before.
Unlike many of its competitors, which have been rapidly adding offices abroad, particularly in the Middle East and Asia, Wegelin feels no need to follow the trend.
Orgland said: "There are enough opportunities at home, for us not to think at this time about opening an office abroad."
del.icio.us
Digg
Newsvine
reddit
StumbleUpon
