Reichmuth & Co has found an unique niche: the tiny Swiss private bank is seeking returns in the railway romanticism of the transalpine Gotthard tunnel.
Credit Suisse boss Tidjane Thiam often invokes the life of Alfred Escher to underscore the Zurich-based bank's Swiss roots: the 19th century politician has near-diety status in Swiss establishment circles.
Escher was the linchpin between politics, railways, finance and education during a key period of Switzerland's development. He established Credit Suisse in 1856 as well as insurer Swiss Life – not to mention leading technical university ETH in Zurich – in order to carry out ambitious infrastructure projects such as the 1880 transalpine Gotthard tunnel breakthrough.
Money for Railways
Today, more than 800,000 freight trains roll through Europe daily, thousands of them through the key north-to-south axis. Railway expansion is still a capital-intensive undertaking: Switzerland has budgeted 12 billion Swiss francs for the Gotthard, including a faster, more direct base tunnel which opened last year.
The infrastructure investment led Lucerne-based private bank Reichmuth & Co to tap into Escher's legacy of infrastructure investment.
«We came up with the idea after a family-owned train carriages firm which wanted to expand approached us,», bank boss Christof Reichmuth (pictured below) told finews.com. Why? The bank in turn has a slew of clients willing to put their money towards «sensible innovative ideas,» the managing partner said.
Reichmuth founded a corporation which owns the carriages and rents then to railway operations – an investment tailor-made for grown-up railway geeks.
«We have already invested 200 million Swiss francs in our fleet. All profits from the rentals are paid out to our clients,» the banquier said.
Client Money Into Trash
Stable returns in a low-interest rate environment – what's not to like? Reichmuth, which is known for seeking often-neglected product areas, found a niche for itself and quietly developed the infrastructure idea.
The private market Reichmuth Infrastruktur Schweiz KGK has invested client money for nearly three years in a growing portfolio of assets. Each sub-corporation owns freight carriages, locomotives, railway track layering machinery, renewable energy and social infrastructure.
The white-gloved private bank has even poured money into the waste business: a Reichmuth vehicle invested in Helvetia Environnment last year, a major waste project which UBS has also invested in through its funds.
Big Banks Wade In
Switzerland's major banks have also discovered infrastructure investment at home as a lucrative niche: UBS has 400 billion francs in pension money invested in renewable energy, while Credit Suisse has waded into hydroelectric power stations.
CSA Energie-Infrastruktur Schweiz, a vehicle of the bank's occupational investment scheme, reached 600 million francs when it reopened the infrastructure fund – Escher would be proud.
«Equity capital with 6 percent interest and low volatility – that simply makes a lot of sense for many clients,» the modern-day Escher banker at Reichmuth said.
