The Safe Haven Capital of the World
The article below is from our BRIEFINGS newsletter of 26 February 2021
In times of uncertainty, Switzerland, long known as a safe haven for financial assets, has benefited from strong investor inflows. We sat down with Dominique Wohnlich, head of Goldman Sachs’ Private Wealth Management business in Switzerland, to discuss the impact of the pandemic on the business and what clients there are focused on.
Dominique, can you give us a sense of the concerns that are top of mind for your clients right now?
Dominique Wohnlich: Clients are clearly still concerned about COVID-19, as countries across Europe struggle with the distribution of the vaccine. In Switzerland, there have been about 500,000 infections in a population of about 8.5 million, although we expect a large proportion of the country’s population to be vaccinated by the end of the second quarter. And given expectations of stronger global growth in an environment of low-for-longer interest rates, clients are looking to increase their allocation to risk assets, specifically to public equities and private markets.
Did the pandemic have any impact on clients’ investment strategies?
Dominique Wohnlich: Since many of our clients were unsettled by the market upheaval and concerned about their families’ health and safety, our conversations with them increased sharply. The majority of our clients initially focused on creating more short-term liquidity, although many remained actively invested in the markets. Still, the crisis affected our clients in different ways. Many businesses had to re-evaluate their financing structure to diversify and improve flexibility, while others with tech-focused operations benefited from the digital acceleration across industries. And some clients with exposure to the European hospitality or tourism sectors faced some difficulties. Throughout those conversations, we emphasized the importance of staying invested.
Tell us more about the investment landscape in Switzerland. Why is it considered an important financial hub?
Dominique Wohnlich: There are really two primary reasons: the country’s banking system and Switzerland itself. Switzerland’s banking system holds about $4 trillion in private assets, of which about two-thirds are from investors and families domiciled outside of the country. Overall debt levels are relatively healthy with the country’s national debt amounting to about 41% of gross domestic product in 2019—a figure that is estimated to remain below 50% in the coming years. In addition, the country’s strong data protection framework is becoming increasingly important to wealthy clients looking to protect their families’ privacy. And aside from being one of the wealthiest countries in the world, the Swiss franc is considered a safe-haven currency. In fact, any time there is a global crisis, the country sees significant asset inflows.
Looking ahead in 2021, what are some of your priorities and opportunities you see in the region?
Dominique Wohnlich: One of our priorities is to build on our commitment to the region and long experience in managing money for international families. The population is expanding and with it, the country’s aggregate wealth, which makes it an exciting time to be in the market. Along those lines, we have a presence in Zurich, recently re-activated our office in Geneva and have been hiring top talent to expand our business here. As far as investment themes, sustainable finance is a key focus for our clients in the region, especially now that Europe has embarked on the path to become the world’s first climate-neutral continent by 2050 and has announced a new Green Deal that will drive economic recovery. In fact, our largest clients are committing substantial capital to ESG and impact strategies. Beyond that, since COVID-19 has created a situation where the return outlook for high-quality fixed income is challenging in most European countries in the near future, our clients are looking to generate returns through growth sectors, such as technology, or by looking to invest in higher-growth jurisdictions as well as in alternative asset classes, such as private equity.