It came as a big surprise to the Swiss financial market. A survey by the Swiss Banking Institute at the University of Zurich revealed that virtually overnight Switzerland had become a nation of shareholders, beating the US in direct ownership of stocks. Switzerland used to be regarded as an underdeveloped country when it came to individual equity investments. The prevailing view was that the conservative Swiss preferred the safety of savings accounts and bonds. Along with the recent surge in retail investors has come a challenge for a Swiss investor relations community used to dealing with a clubby group of professional institutional investors. Now, says Martin Meier-Pfister of Wirz Investor Relations in Zurich, ‘To reach retail investors, companies have to tell a corporate story and bind their shareholders through personalization, rather than just talk about figures.’
As a result of the growth in individual share ownership, finding enough investor relations executives to satisfy company needs also has become a problem at many Swiss firms, according to Zurich public relations consultant Klaus Stoehlker. ‘Swiss companies are looking for people. The market is booming for investor relations people,’ he suggests. So far, however, Swiss companies seem to be coping with increased retail investor demandsm through a major build-up in internet services that allow information to be transmitted to both institutional and private investors simultaneously. At the same time, they are attempting to make traditional communications more understandable for the so-called man in the street. For example, annual reports and investor newsletters and magazines have become glossier and more colorful.
Commissioned by the Association of Swiss Commercial and Investments Banks, the Swiss Banking Institute report, Equity ownership in Switzerland 2000 (www.isb.unizh.ch), co-authored by Teodoro D Cocca and Rudolf Volkart, determined that 32 percent of all Swiss citizens over the age of 18 hold a considerable portion of their assets in direct equity investments, making Switzerland one of the global leaders.
In pole position is Australia with 41 percent, followed by Sweden with 35 percent, Switzerland, then New Zealand with 31 percent, the UK with 30 percent and the US and Canada each with 26 percent. Since 1997, the number of individual shareholders in Switzerland has doubled as – says the study – people seek to increase their overall wealth and provide for their old age. Despite recent stock market turbulence and new economy disappointments, the survey’s co-author Teodoro Cocca says he expects growth in share ownership to continue. ‘Unless there is a real stock market crash, there will continue to be more investors in Switzerland,’ he predicts.
Mutual love
The picture changes somewhat when indirect investments through mutual funds are included. Then the percentage of adult Swiss investing in the share market rises to 34 percent, but falls to sixth place behind Australia (54 percent), Canada (52 percent), the US (48 percent), the UK (40 percent) and New Zealand (38 percent). Nevertheless, growth in Swiss mutual fund investment has surged in recent years, indicating that the country may catch up.
Total Swiss investment fund assets rose by 31 percent in 1999, up from a growth of 20 percent in 1998, and 17 percent in 1997. At the end of July 2000, the Swiss held Sfr469 bn in investment funds. Says Swiss Funds Association official Hans Tschaeni, ‘We expect slower growth for full-year 2000 because of uncertain stock market conditions, but still a good increase.’ Richard Meier, a Swiss Exchange official, believes the new economy shake-out could influence more investors to use funds because of their professional management. ‘We may see Switzerland going more in the direction of the US which is more developed in investment funds,’ Meier suggests. Nevertheless, retail investors have become a force to be reckoned with in Switzerland. Indeed, a proposed legislative change should make direct investment more attractive for a wider range of the population. Swiss shares tend to be heavy, carrying prices of several hundred or several thousand Swiss francs. For example, a Nestlé share costs around Sfr3,750, Novartis Sfr2,810, and Zurich Financial Services Sfr941. Light shares like Ciba’s at Sfr105 are few and far between in the blue-chip sector.
In the Swiss Banking Institute report, some 51 percent of those surveyed who do not own shares say that they would invest in equities if share prices were lower. To meet this need, the Swiss government plans a reduction in the minimum nominal price of a share to one centime (Sfr0.01) from Sfr10. This will allow companies that have reached the present legal limit to split their stock, reducing the weight of their shares. The measure is expected to pass through federal parliament by May 2001. ‘With this change, the stock splits will come,’ says Rene Weber, financial analyst at Bank Vontobel in Zurich.
Net time
Given this surge in retail investors, the internet has come at the right time, according to the Swiss investor relations community. At Clariant, the number of shareholders increased to 37,000 in October 2000 from 29,198 at the end of 1999. ‘The increase in shareholders was mainly on the retail investors’ side,’ notes Philipp Hammel, who heads the specialty chemicals concern’s investor relations. Hammel reports a lively contact with retail investors through e-mails which have risen greatly in number during the last two years. Now Clariant releases all relevant information simultaneously to the press and on the internet, and anyone can apply to be put on Clariant’s e-mail distribution list.
‘Internet and shareholder information mailings are the most important means to reach retail investors,’ says Hammel. True to Meier-Pfister’s belief that companies should effectively tell corporate stories when reaching retail investors, Clariant now has a revamped investors’ magazine that seeks to convey the message that fine chemicals are important features of all our lives. It shows, for example, the colors and pigments that are produced by the company as quality of life enhancers.
Martin Huser, head of Helvetia Patria group’s five-person investor relations team, hails the internet as a democratic tool which makes it possible for companies to treat all shareholders equally. ‘The internet is a quick and easy way to inform so that investors receive information immediately,’ Huser says. The insurer won first prize for its internet home page from Invest magazine, a publication of the Zurich bi-weekly business publication Finanz und Wirtschaft. At Nestle, corporate communications head Francois Perroud suggests that the internet is the ‘great leveler’, allowing the food giant to communicate simultaneously with all investors, regardless of their access to the likes of Reuters or Bloomberg. Today, Nestle’s presentations for institutional investors are available simultaneously on the company’s home page, and any investor can listen to financial analyst conferences over the web.
Contrary to the common Swiss belief that institutional investors are more loyal than retail investors, Ciba’s chief investor relations officer, Matthias Fankhauser, says his experience is that private investors are more stable. Under a quarter of the specialty chemical company’s shareholders are retail, but Ciba is interested in attracting more. About 20 percent of calls to the department come from smaller investors, but this is progress from practically no calls two years ago. Once again, all relevant financial information is released immediately on Ciba’s web site. Fankhauser adds that his department works very closely with Ciba’s press department because of the importance of the printed press, television and radio for retail investors. Indeed, media coverage aimed at retail investors has risen dramatically in Switzerland. Daily newspapers, as well as television, have expanded business reports. New publications targeting smaller investors have started up. The latest is the magazine Stocks, which tells investors how to make money out of everything from shares to contemporary art to collector watches. Most important of all, however, is the increasing amount of news provided over the internet by banks and brokerage houses seeking to bind old clients and investors, and attract new ones. Often the news is not only investment related but lifestyle oriented: the idea is that people want more than market tips.
One of the best web sites is Credit Suisse’s new online investment service for private clients in the European Union (www.credit-suisse.net). No need to buy a glossy magazine if you want to catch up with the latest fashion tips, get advice on furnishing your home or find out whether rock star Sir Elton John is performing in Zurich; just turn to the giant Swiss bank’s internet pages. Such tidbits are built into a site offering online equity trading, research and advisory services, as well as a section on ‘tactile investing’ which delves into luxury collectibles. The name of the e-commerce game is not technology for technology’s sake, but to bind people to the bank, says Ivo Furrer, a Credit Suisse e-business executive.
The Swiss Banking Institute report shows that 40 percent of investors surveyed use the internet as a source of information. Contrary to the popular assumption that young investors dominate internet use, the survey found that those aged 40-59 were most devoted to the web. ‘The survey shows that retail investors have an enormous thirst for information,’ says Cocca. ‘In meeting it, the internet will play an increasingly important role.’
