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Swiss investors pile into money market funds, gold

Section: Daily Dispatches

By Martin de Sa'Pinto
Wednesday, March 11, 2009

ZURICH -- Money markets accounted for most inflows into Swiss-registered funds in February, while Zuercher Kantonalbank's gold-backed exchange-traded fund saw the largest inflows of any single fund, Lipper data showed.

All told, inflows came to 4.6 billion Swiss francs ($3.97 billion), with money market funds alone accounting for 3.7 billion francs, or 24.9 percent of all assets, and overtaking equities to become the second largest asset class after bonds.

Among asset managers, Pictet saw the largest inflows for the month, with investors pouring 2.7 billion francs into the private bank. The biggest loser was State Street, which had outflows of 148 million francs.

"Institutional investors are taking money from their banks and putting it into money market funds," said Otto Kober, Lipper head of research, Switzerland.

"Since money market assets are segregated, investors are transferring funds as security against bank defaults. Last year we could see a transfer from bonds to money markets. This year, new money is going directly into money markets," said Kober.

Lipper data also shows that the fund with the highest inflows was the Zuercher Kantonalbank gold ETF, which pulled in 523 million francs. The next major beneficiaries of inflows were individual money market funds.

Julius Baer physical gold funds, ZKB silver, and ZKB platinum also saw strong inflows.

"Funds had 7.4 billion francs of net new money in January and February, but overall assets under management fell because of continuing market weakness," said Kober.

Nowhere was this more evident than in equity funds, which had inflows of little under 700 million Swiss francs. Poor market performance weighed heavily as assets under management sank from 131 billion francs to 119 billion francs.

With 20 percent of assets denominated in dollars, the significant depreciation of the franc against the dollar in January and February had the effect of boosting assets when evaluated in francs.

However, Kober said this effect was likely eliminated by the weakening of the euro against the franc. Swiss-registered funds hold 46 percent of their assets in euro-denominated instruments. ($1=1.158 Swiss francs.)

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