Swiss Finance: Capital Markets, Banking, and the Swiss Value Chain

CHAPTER 4

Swiss Institutional Investors

INTRODUCTION

Financial intermediaries exist because they perform valuable services for savers and borrowers.1 Savers use them for the efficient and effective ways they offer to invest and withdraw funds in different amounts. Borrowers use them for their lending flexibility, power to lower search costs, and access to broad and deep pools of funds. Generally speaking, financial intermediaries moderate the risk-to-reward tradeoff by pooling funds, specializing in risk evaluation (i.e., credit, liquidity, and market risks), and engaging in measured risk-taking activities.

The similarities among financial institutions, such as banks, insurance companies, and mutual funds, are strong and, to be sure, part of this similarity is legal because most financial institutions need licenses to operate. Nevertheless, far beyond this legal commonality are economic resemblances, which are grounded in human resource competencies, fund transfer goals, and an ability to engage in risk and maturity transformation. It is for this reason that competition in the financial markets has intensified.

This chapter focuses on Switzerland's insurance companies and related financial intermediaries, such as pension funds, mutual funds, and other types of, so-called institutional investors. It is fair to say that historic lines of competition are blurring in the Swiss financial markets, and the nation's financial landscape is in transition. Therefore, focusing solely on the ...