Swiss Pensionskassen are paying on average 0.42% of their managed assets in asset management fees, according to a survey by pension fund association ASIP. But experts have warned this does not paint the whole picture, as ASIP’s figure reflects only the costs that must be reported under new regulations and do not cover costs from private equity funds, hedge funds or funds of funds, which do not report a TER, or implicit costs in collective schemes, writes Barbara Ottawa in IPE.
Swiss consultancy c-alm did include those added, hidden costs in its initial report on the second pillar in 2009, commissioned by the Social Ministry in preparation for the structural reform. Ueli Mettler, a partner at c-alm, told IPE: “It is a matter of reputation for asset managers. They do not want to see their products on the so-called ‘black list’ of non-transparent vehicles in a Pensionskassen’s annual report.”
He added that UBS had been one of the first to start calculating a synthetic TER for its fund-of-fund offering, and others are following. If all of the currently still non-transparent vehicles are calculating a TER, the costs reported by Pensionskassen could increase by as much as one-third, c-alm estimates.
Another trend, according to Mettler, is the inclusion of implicit transaction costs in the calculations, which, on average, adds another 15-20% to the reported costs. Those are not calculated by the provider and can only be estimated by pension funds. However, Mettler warned against including “too many estimate-based figures” and assumptions into the total calculation, as this would be “a path back into the mist”. Currently, more than 98% of all collective investment schemes in the second pillar have attained transparent TER status.
