Thierry Hertig

Following the publication of a thorough empirical study on the behaviour and influence of institutional investors in Switzerland and in view of the increasing importance of institutions, the Centre d’études juridiques européennes of the University of Geneva decided to organize a conference to discuss the present and future role of Swiss institutional investors.
The aim of this conference was to analyze, on the basis of the empirical results, the role of institutional investors vis-à-vis financial intermediaries, stock markets and public companies in Switzerland, taking into account some of the experiences made abroad. In particular, it seemed useful to look at the possible economic and legal consequences of the increasing financial power of Swiss institutional investors, in relation to both their investment policy and their attitude towards information and the corporate governance of Swiss public companies.
In order to make the discussion as broad and constructive as possible, economic and legal experts were invited, who were simultaneously representatives of the various parties involved.
The organization of this conference was largely facilitated by the financial assistance of the Geneva Stock Exchange, which offers regular and highly appreciated support for the setting up of conferences on various legal and financial topics.
– 1. Asset allocation of institutional investors
– 2. Institutional investors and financial intermediaries
– 3. Institutional investors and stock markets
– 4. Institutional investors and information policy
– 5. Institutional investors and corporate governance

Up to now, and in most industrial countries, shareholders of large public companies could be divided into two categories : large and active shareholders who often hold a majority of the voting rights, and small and scattered shareholders who disregard more or less their shareholder rights and simply sell their stocks when they are not satisfied with the company’s development.
A third category of shareholders is becoming more and more important in many countries : the institutional investors. This category includes pension funds, investment funds, insurance companies, etc., i.e. entities which collect and invest the funds of a large number of individuals and represent their interests.
As institutional investors are generally regarded to be stable and amicable shareholders, the are often appreciated and seeked for by public companies looking for financing. On the other hand, institutional investors sometimes decide to put their holdings together in order to influence, or even to amend substantially, the strategy of a company. When this is the case, the rights of minority shareholders appear to be significantly larger than what is usually believed.
Institutional investors further have specific needs with regard to the organization of financial markets. For instance, they attach a high value to the possibility of purchasing and selling large stakes at any time of the day. Their specific needs lead to the creation of « wholesale markets », as opposed to the more traditional « retail markets ». Likewise, the relationship between banks (or portfolio managers) and institutional investors differs significantly from that between banks and their traditional clients.
Insitutional investors have been important shareholders of public companies for several decades in the United States and in the United Kingdom. A similar trend is beginning in Switzerland, where the behavior and influence of institutional investors have hardly been investigated to date. Mr. Martin Anderson and Mr. Thierry Hertig have the great merit of having carried out the first thorough study on institutional investors in Switzerland on the basis of a detailed empirical analysis.
The development of our large public companies, the application of the new Swiss corporation law, the organization of financial markets and the evolution of portfolio management business will certainly be influenced substantially by the development of institutional investors (whether Swiss of foreign).
Chapter 1 : Introduction
Chapter 2 : Framework of institutional investment in Switzerland
– 2.1 Classes of institutional investor
– 2.2 Economic and financial environment
– 2.3 Legal environment
Chapter 3 : Insitutional investors and Swiss financial markets
– 3.1 Investment strategies of Swiss institutional investors
– 3.2 Investment strategies of foreign institutional investors on Swiss financial markets
– 3.3 Relations between institutional investors and financial intermediaries
– 3.4 Effects on Swiss financial markets
Chapter 4 : Institutional investors and Swiss public companies
– 4.1 General approach towards investments in Swiss stocks
– 4.2 Determining factors for stock selection
– 4.3 Attitude of institutional investors as shareholders
– 4.4 Effects on Swiss public companies
Chapter 5 : Conclusions