Can you describe some of the challenges you have encountered?
For us and for our competitors, one of the biggest hurdles was to quickly and efficiently transition from a centralized office environment to working from home. This is especially challenging for index solution teams because there is no margin for error in indexing, where a missed deadline in terms of changing portfolio constituents and/or index rebalancing will result in an unacceptable degree of tracking error. At Credit Suisse Asset Management, we have the largest index solution team in Switzerland. We have successfully managed to maintain a smooth operation with 80% of our professionals working from home, including employees from all front- and back-office functions. This demonstrates the importance of the investment we made in our customized Aladdin® system, which we rolled out in January 2019. Aladdin is a fully integrated platform that covers every function from trade execution to risk management. We also faced the additional challenge of launching three new ETFs and converting three index funds into these ETFs in the middle of the market turmoil in mid-March. In such exceptional circumstances, postponement was an obvious consideration, but the decision to continue with the schedule as planned proved the right one. The launches were highly successful, reaching more than USD 2 bn in assets at the end of May. These new products collectively form a compelling and integral component of our overall index fund offering. With 95 index funds and CHF 100 bn in assets, we have become the fourth-largest provider of index mutual funds and ETFs in Europe.
How is the environmental, social and governance (ESG) theme influencing the passive management universe?
The appetite for ESG-compliant solutions is a very strong trend across the asset management industry and one that is set to endure. Across Europe, the US, Japan, Pacific (ex Japan) and the emerging-market complex, ESG benchmarks outperformed broader market indices over the first quarter of 2020. One reason for this is that the application of ESG criteria tends to reduce exposure to companies operating with riskier business models or weaker risk management systems that make for high vulnerability to external shocks. In order to meet this strong demand, we have established a full range of ESG index solutions comprising 14 tracking funds and ETFs.