FINANCIÈRE SYZ SA ANNUAL REPORT 2019 ANNUAL REPORT 2019 FINANCIÈRE SYZ SA FROM THE SYZ COLLECTION : SYLVIE FLEURY_COMPOSITION AVEC BLEU, JAUNE ET BLANC, 1992_ ACRYLIC AND SYNTHETIC FUR ON WOOD, 43 X 33 CM Throughout 2019, the SYZ Group’s three Chief Executive Of!cers worked to strength- en their businesses based on our clients’ current and future needs. LETTER FROM THE BOARD OF DIRECTORS Last year, investors focused on every economic hiccup and to broaden our offer in liquid and illiquid alternatives that are sign of geopolitical tension for clues that the global economy’s uncorrelated to more traditional markets to help our clients record bull run was coming to an end. This year, the coronavirus diversify their asset allocations. pandemic has dragged us into a downturn more dramatic than Once the shock of the coronavirus crisis has passed, we believe anyone anticipated. that central banks and governments will have created the Throughout 2019, the SYZ Group’s three Chief Executive monetary and !scal conditions for a solid recovery. We are living Of!cers worked to strengthen their businesses based on our through a unique period of turmoil, but one that does not alter clients’ current and future needs. That means maintaining our the underlying global dynamics. As shown by the unprecedented commitments to those same values of excellence, innovation levels of government !scal spending, we do not believe that the and independence that have formed our core principles since end of the bull market has brought with it the end of the era our founding 24 years ago. One of these principles is that we of persistently low-to-negative interest rates. With underlying continue to offer our clients a transparent choice in their fee economic growth and in"ation remaining subdued, business models. We also remain convinced that, whatever stage of cycles, we believe, will continue to be milder as nominal interest the business cycle, all clients can bene!t from diversi!ed and rates remain lower in the long term. risk-adjusted portfolios, thanks to the careful management of 2019 showed the value of active management in volatile active, high-conviction, long-only or alternative strategies with markets. This year has only reinforced that conviction. We have downside protection. worked to create a range of tools to diversify client portfolios to The SYZ Group saw all regions performing well with some include, as appropriate, hedge funds and real assets, including outstanding investment performances. We worked hard to private equity, that offer uncorrelated returns compared with manage costs and streamline our businesses while investing for more liquid, and often more turbulent, asset classes. As we face the well-being of our clients and employees. That brought our up to the sometimes tough decisions of building an investment Common Equity Tier 1 Capital ratio to 23.1%, once again putting business that is !t for the challenges of the months, years and us far in excess of Switzerland’s regulatory requirements. decades ahead, we look forward to working and investing alongside our clients and partners. As you may be aware, in the light of these strategic changes, Yvan Gaillard, CEO of Banque SYZ decided this year to report on our private banking activities separately in order to provide our clients earlier in the year with greater transparency about the path and ambitions of this business. Our advisors successfully navigated the complexities of 2019’s markets and US dollar, Swiss franc and euro portfolios all !nished the year with meaningful gains and top-quartile performance, as measured against our industry. The year, and the challenges of 2020 to date, also reinforced our longstanding conviction that active strategies Philippe Reiser Eric Syz play a key role in portfolio construction and management Chairman, Board of Directors Chief Executive Of!cer when coupled with strong downside protection. We continue SYZ GROUP SYZ GROUP FINANCIÈRE SYZ SA, ANNUAL REPORT 2019 PAGE 5 MANAGEMENT REPORT With the hindsight of 2020’s demands, it is worth remembering For many years, our wealth management business has bene!ted that 2019 presented its own market challenges and was a year of from the expertise and experience gained in managing transition for all of our businesses. The private bank successfully institutional clients’ portfolios. A year ago, we had considered navigated the complexities of the late-cycle bull market, our investing in our asset management business to build it further. asset management business agreed to sell its Luxembourg However, the market headwinds meant that we decided to management company and SYZ Capital registered tremendous exit our wholesale fund distribution activities as a stand-alone returns in its !rst full year of operations. business, rather than continue a loss-making business in an environment that is becoming more challenging for all but the We recorded sound performance across our operations, providing very largest of the world’s fund providers whether they are on most clients with investment performances that matched or the passive or active side. outperformed our benchmarks. We delivered this performance while working to minimize decision-making stresses as we want This decision, we believe, makes the most sense for our clients. to help clients to avoid making emotional decisions that could Our commitment has always been, !rst and foremost, to build lead to poor outcomes. As we have been reminded during this a business founded on transparent investment professionalism. recent coronavirus crisis, anxiety is unavoidable, but drama is The decision to sell our Luxembourg business and the OYSTER always optional. SICAV vehicle to iM Global Partner was based on the conviction that this is the best sustainable option for our clients as well Last year we put in place three independent CEOs, each with as staff and the Group as a whole. The professionalism, operational responsibility to deliver on their strategic business determination and expertise displayed by our teams as we make plans, allowing Eric Syz to concentrate more intensively on the transition to the new structure has been outstanding. client relationships and our Group strategy. Finally, we are proud of the early successes of SYZ Capital in its Yvan Gaillard, previously Chief Operating Of!cer, took over as !rst full year of operations. SYZ Capital, with Marc Syz as CEO, CEO of Banque SYZ in February 2019. We have in place a robust, has brought innovation to private market investments, allowing systematic, institutional-style investment process for private our clients to co-invest with the Syz family of entrepreneurs in a clients that enabled us to deliver strong results throughout space which has traditionally been the preserve of institutional 2019, and continues to outperform our peers in 2020. In the investors. It offers the value of illiquid alternatives to clients current crisis, one of our roles is to help clients to achieve their through a range of strategies that are uncorrelated to more long-term goals and to make sound decisions. We are making traditional markets. Understandably, these innovations are full use of all the tools available to manage a balance between generating huge demand. In 2020, SYZ Capital broadened its performance and risk, because we believe in the value of being alternatives offering to create a leading proposition and centre of invested throughout the economic cycle. innovation for both liquid and illiquid strategies. The expansion In January 2019, Will Nott stepped into the role of CEO of sees SYZ Capital incorporate liquid alternatives and hedge fund SYZ Asset Management. Under his leadership, the business solutions previously available from SYZ Asset Management and improved its environmental, social and governance ratings SYZ Private Banking. through extensive training and certi!cation, our fund range Our business model is not and has never been, about growth at went through a complete overhaul and our teams proved their any price. We continue to offer our clients a choice of fee models professionalism time and again in markets that were truly the and believe in our founding commitments; to be as transparent perfect storm for active management strategies. as possible while minimizing any potential con"icts of interest. PAGE 6 FINANCIÈRE SYZ SA, ANNUAL REPORT 2019 MANAGEMENT REPORT The SYZ Group is at a turning point in its history. We remain managers’ margins. This made business much more dif!cult for convinced that, just as the future will continue to offer challenges smaller, sub-scale enterprises. We expect that this consolidation and opportunities, we will adapt our business to maintain our will continue as !rms that do not enjoy a critical mass in the focus of putting clients’ needs and ambitions !rst. industry merge with others. In this environment, we attracted net new money and our assets under management increased as our external asset management SYZ PRIVATE BANK clients entrusted us with a larger share of the market. Investors 2019 started with uncertainties about trade and recession fears continue to search for trusted partners and specialist expertise. that continued throughout the year as manufacturing activity This is providing us with opportunities to grow our business stagnated. Central banks performed U-turns in monetary policy further as we develop our teams in Zurich and Geneva. Our and consumer spending held up, supporting economic growth. business continues to focus on adding value for clients as we Despite the often persistently negative market sentiment, the offer a service across a spectrum of investments, from economic underlying business cycle was sound and translated into solid strategy through execution and reporting. corporate earnings. Our rigorous approach to stock selection paid off and for our discretionary clients, we gradually locked- in those healthy returns, using options and convertible bonds. SYZ ASSET MANAGEMENT While this caution necessarily came at a small cost, it also offered SYZ Asset Management (SAM) reached a turning point in 2019.