If one adds the insurance sector, that number is closer to 14 percent. That percentage has increased significantly since 1990 from a total of 10% of GDP or less than 7% for the banking sector only. Importantly, this does not take into account the many economic activities which are directly linked and in many cases dependent on a vibrant financial sector. In terms of employment, the financial and insurance sectors together employ approximately 185’000 people or 6% of total Swiss employment. The total federal and local tax contribution of the Swiss banking sector amounts to an estimated CHF 13 billion or 13% of total tax revenues. A mere perfunctory consideration of these figures should suffice to underline the importance of defending and maintaining Switzerland’s status as a leading global financial center. In a 1974 study, Charles Kindleberger traced the history of financial centers in Western countries. What is striking about Professor Kindleberger’s historical findings is that nothing should ever be taken for granted. Not unlike tides, cities and countries as international financial centers rise and fall. For the most part, this rise and fall seems to reflect dynamic criteria such as transportation infrastructure, political stability and regulatory patterns.1 Since the 1970s, the competition amongst international financial centers has of course become genuinely global with diverse places such as Luxembourg, Singapore, Hong Kong, Dubai and, most recently, Shanghai joining the race. Switzerland has good reasons to be confident about its ability to defend its status. Most importantly, it sets out from a position of strength.
In addition, there has been an important shift from the traditional high net worth clients investing in individual hedge funds to funds being invested in hedge funds via diversified pools and formal fund of funds structures. These pooled assets, coupled with liberalizing regulatory developments have opened up hedge funds to a more diverse universe of investors, including a wide range of institutional and retail investors. Currently, the total size of funds invested in hedge funds via pooled structures is estimated to be approximately USD 300 billion or nearly a third of the underlying hedge fund industry. Remarkably, annual growth rate estimates of the pooled funds suggest that their expansion has proceeded at a more rapid pace than the underlying hedge fund industry. This implies that a significant portion of new assets flowing into hedge funds does so via collective asset management pools. In a competitive environment, the Swiss financial sector has succeeded in leveraging its position as one of the world’s leading asset manager to secure an dominant position amongst collective asset management pool operators in the hedge fund industry. Though many of the early formal funds of funds were registered under Luxembourg, Cayman Island or Bermuda law, Swiss financial firms today manage a significant part of the world’s alternative asset management pools.