Raiffeisen to launch its own index funds with Pictet

Raiffeisen will now therefore also be offering its clients its own index funds. The products will be managed by Pictet, the Geneva private bank. Pictet has more than 20 years' experience in this field and is the fifth-largest international provider of investment funds, with more than CHF 22 billion in assets under management.

Increased demand for passive investments

By launching its own index funds, Raiffeisen is responding to the sharp growth in demand for passive investments. Raiffeisen and Pictet have deliberately chosen to launch index funds rather than opting for a range of exchange-traded funds (ETFs). Adrian Töngi, Head of Product Management at Raiffeisen Switzerland, explains the strategy thus: “Index funds are the products best-suited for investors with long-term investment horizons, as there is no need for intraday trading. As such, the market-making fees that are payable on ETFs are not charged to investors who buy index funds”. This new selection of index products will supplement the already successful product range currently being offered as part of the strategic partnership with Vontobel.

Index funds - better value, greater transparency and safer than ETFs

Apart from the greater transparency that index funds offer in terms of management fees, under Swiss law there is also no stamp duty payable for transactions on index funds, which is not the case with ETFs. The index is physically replicated, i.e. the individual shares are purchased, whereas in some cases with ETFs, swaps or derivatives are used. As such, there is no counterparty risk when the index fund is constructed. Furthermore, the new products will include anti-dilution provisions. Added to this, the transaction fees are allocated to the initiators in favour of the fund, thereby protecting investors in the fund with a long-term horizon.