Born and raised in the Swiss regions ‘Glarner Alpen’ and ‘Berner Seeland’, respectively, Thomas Pfaendler and Patrick Jnglin make the perfect duo to oversee Julius Baer’s ‘Swiss Focus’ Investment Management Boutique. In our ‘Wealth Architects’ interview they explain why people invest in Switzerland, what the famous Swiss modesty is all about and what they prefer to analyse in their free time.
You are heading an Investment Management Boutique. Can you please explain what that is?
Thomas Pfaendler: “We are part of the investment management arm of Julius Baer, which is responsible for discretionary mandates. This means that we invest clients’ assets in line with their principles, investment objectives and profile, as well as our Bank’s strategic asset allocation. Within investment management, every so-called ‘Investment Management Boutique’ has a different focus. Our Boutique is fondly called the ‘Swiss Boutique’ as we focus exclusively on the Swiss equity, real estate and bond universe.”
Why do people invest in Switzerland?
Patrick Jnglin: “Just google ‘Switzerland’, and you will see dozens of pictures of magnificent lakes and mountains, chocolate, cheese and watches. Who can deny it – Switzerland has its perks! But our home is definitely more than a beautiful travel destination. It is one of the top three countries in the world in terms of GDP per capita.“
Thomas Pfaendler: “There are several good reasons from both market and macro perspectives. The first reason is the most obvious and most frequently quoted one, yet it can never be overstated: it is one of the strongest and most advanced free market economies in the world. Not only that, it also regularly appears on the top of indexes such as ‘global innovation’ and ‘global competitiveness’. Industry leaders in virtually every sector have Switzerland as their home base. Why? The country has a strong competitive positioning and enjoys political stability with favourable structural conditions. Major banks as well as healthcare, consumer and luxury goods and services companies are just a few examples.”
Patrick Jnglin: “And while it is relatively small, Switzerland has close ties with foreign markets. A lot of Swiss companies have a global footprint. This potentially enables them to benefit from structural, global growth trends.”
Who is your typical investor?
Patrick Jnglin: “You might assume that we’re only talking about the Swiss. In fact, we communicate with both Swiss and foreign investors alike. Regarding the Swiss, it is interesting to observe how the famous Swiss modesty is directly reflected in their investment style. They typically have conservative, down-to-earth investment profiles, look for liquid solutions and avoid complex vehicles. Furthermore, they like to hold shares and debt securities of companies that are ‘household names’, whose shares are denominated in Swiss francs. They want to be protected from direct foreign currency risk and keep their wealth in their ‘comfort zone’.”
Thomas Pfaendler: “Foreign investors, on the other hand, typically try to benefit from the strength of the Swiss Franc. At the same time, they aim at being exposed to a strong and stable economy. Swiss companies have been constantly under pressure to improve their efficiency to compensate for the strength of CHF vs. major currencies such as the EUR and USD. This is one reason why the Swiss equity market has been amongst the best performing equity market since the turn of the millennium.”
Which principles do you follow when working together as a team?
Thomas Pfaendler: “Our key element is to be very well connected to the companies we monitor. We grew up in Switzerland and even completed our apprenticeships at some of the companies we now follow. Consequently, we know their culture and management, visit their investor days, and meet with them frequently to stay up-to-date regarding their strategy.”
Patrick Jnglin: “Furthermore, we agree to prefer industry leaders and innovators with a sound balance sheet, down-to-earth corporate culture, and management teams, which do not shoot high and under-deliver, but consistently achieve what they promise.”
Do you ever get tired of analysing Switzerland?
Patrick Jnglin: “I assume you wanted to hear something else, but even in my free time I enjoy this country. I am a sports fan. I like cycling on my BMC bike – which, by the way, is a great example of a Swiss company that has developed nicely in a niche market (triathlon, cycling) through constant innovation and went global. Besides this, I like following sports such as tennis, football and ice hockey.”
Thomas Pfaendler: "Although I do agree with what Patrick says, whenever I find some time I love to travel beyond our borders to visit ancient ruins. These structures of the past remind me that although we will not live forever, human beings are capable of great achievements that can last for centuries and even millennia.”