Swiss pension funds will be also influenced by developments in the EU, such as the EU taxonomy, MIFiD regulation and reporting standards set by specialist bodies. The race among countries to lead the drive into sustainable finance has been relaunched. Swiss asset managers, service providers, academics and pension funds look set to demonstrate high quality and innovation in sustainable investment solutions. Two characteristics Switzerland is already famous for in many other sectors.
There is no shortage of new technologies that can improve retirement outcomes for pension fund members
- Blockchain and machine learning dominate the discussion
- These are complex technologies in an early stage of adoption
- Real time data analytics and common platforms are already operational and can save time and money
- The adoption of new technologies is critical to engagement
When it comes to technological innovation in pensions the two buzzwords are blockchain and artificial intelligence. Blockchain is potentially a revolutionary technology that could significantly reduce the costs associated with pension administration and custody. Artificial intelligence – or more specifically machine learning tools – also promises to optimise many areas of the industry. They could be used to improve communications with pension fund members or to deliver better investment returns.
ESG (environmental, social and governance) is still an unpopular investment strategy in Switzerland. How will it overcome this lack of enthusiasm? asks Gail Moss in IPE.
“There is still uncertainty about returns from ESG stocks,” says Peter Zanella, senior director at Willis Towers Watson Switzerland. “In my opinion there is not a clear picture that ESG returns are at least as good as returns from ‘normal’ stocks. And studies show that so-called ‘sin stocks’ are doing very well. As a company, we currently do not actively float ESG ideas.”
Thierry Bertheau, head of institutional client relations at, Robeco Switzerland, says: “It is steadily gaining awareness. But one hurdle to overcome is the lack of understanding, as well as clear definitions and standards. This could be helped by continuous education and insights. Another frequently mentioned reason is the focus on other priorities, such as funding ratios or performance.”
For those pension funds without access to sophisticated screening systems, a readily available list of possible stocks to be excluded is provided by SVVK ASIR (Swiss Association for Responsible Investments).
Many different ESG approaches are offered by asset managers, from standard benchmark-based exclusions to best-in-class or thematic investments.
But engagement is another way to tackle the issue.
Barbara Ottawa hat in IPE einen aufschlussreichen und klugen Artikel über den aktuellen Stand der 2. Säule verfasst.
The asset pool of Europe’s leading 1000 retirement funds now exceeds €7.22trn – a 2.49% increase over last year’s 4.45%.
Switzerland should link pensioner incomes to long-term market interest rates, according to the International Monetary Fund (IMF). In its latest assessment of the Swiss financial system, the IMF said the ‘guaranteed conversion rate’ – which determines how much of a retiree’s second-pillar pension savings can be paid out each year – should be more flexible to account for rising life expectancy.
“Adjustment of the pension system parameters would support the sustainability of the social safety net,” the IMF said, adding that “population aging makes pension system reform essential”.
The conversion rate should be linked to “the market yield on a long-term sovereign bond and life expectancy at retirement”, the organisation stated. However, Swiss pension professionals criticised the idea of a market-driven approach at this year’s Swiss Pensions Conference, organised by the CFA Society Switzerland.
“This would be the best method to do away with the second pillar as it would become completely unattractive for its members” “The immediate shift to a market-valued technical interest rate [technischer Zins] would lead to a conversion rate of 3.6%, the application of generation tables and an interest rate slightly below 0%,” said Stephan Wyss, founder and managing director of research consultancy Prevanto.
Gerard Fischer, independent consultant and former CEO of Swisscanto, warned: “This would be the best method to do away with the second pillar as it would become completely unattractive for its members.” He added: “For people, it is only important to know what their pension can buy once they retire.” Fischer pointed out that Switzerland still had an “implicit defined benefit system” as pension promises remained unalterable once given.
The Bernische Pensionskasse (BPK) is to recruit a new managing director with Werner Hertzog set to leave after less than two years in the role, IPE has learned. Hertzog confirmed via email that he will leave the CHF13.4bn (€11.6bn) pension fund for the Swiss canton of Berne at the end of October. He did not give any reasons, saying only that he will be “focusing on other tasks”.
Hertzog was previously managing director at Aon Switzerland between 2011 and 2014, and before that led the country’s largest pension fund, Publica, for seven years. After taking a personal sabbatical in 2015, he joined the BPK in December 2016.
No successor has been nominated for Hertzog yet. “This still has time as we are in a very quiet phase and no exceptional leadership decisions have to be made,” Hertzog said.
Switzerland’s AHV fund is shifting to physical gold for the commodity exposure in its CHF35.2bn portfolio. At the end of last week the first pillar buffer fund tendered a custodianship and storage for CHF700m in gold bars via IPE Quest.
The bars are to be stored in Switzerland either collectively or individually, the tender states. The tender marks a shift in the investment strategy for AHV/AVS, as it previously only invested in gold and silver via swaps.
“The supervisory board has decided we are to invest in physical gold bars from now on,” the fund told IPE in a statement. In 2016 the supervisory board of the buffer fund decided to raise its the commodities exposure from 1% to 2% while divesting from energy-related commodity exposure.
The fund explained last year that gold was better suited to add “diversification and hedging in certain situations (inflation or recession)” than the previously preferred energy commodities.
IPE Real Assets’ top 100 ranking of some of the world’s largest real estate investors has captured more than $1.23trn (€1.01trn) in real estate assets held by pension funds, sovereign wealth funds and other institutional capital owners.
The IPE survey shows that, on average, investors are below their target allocations – but by only 130bps. Most have either increased (33%) or maintained (51%) their allocations in the past 18 months.
Most investors (59%) expect to invest the same amount of capital in real estate over the next 12 months as they did in the past 12-month period. Only 15% expected to decrease its activity.
In terms of investment intentions, investors are favouring European markets, followed by North America. Industrial and logistics markets are also top of the list, ahead of residential and offices. Core and value-add strategies are in poll position in terms of strategies deemed most attractive in the current market environment.
Bei den jährlich von der IPE vergebenen Awards wurde Elisabeth Bourqui, Geschäftsleiterin der ABB Group Pension Management mit Sitz in Zürich, mit dem “Pension Fund Achievement of the Year” Award geehrt.
Im Bericht der IPE heisst es:
Elisabeth Bourqui heads the Zurich-based ABB Group Pensions Management team whose remit is to oversee the collective management of the multitude of pension schemes that ABB sponsors worldwide. This includes more than 100 defined benefit and 50 defined contribution funds – both open and closed with different liability and pay-out structures – covering more than 400,000 members. Bourqui joined ABB in 2012 and since then the team has conceived one of the most advanced methodologies for running multiple arrangements in multiple jurisdictions.
This is a risk-based approach that is tailored to the needs of each scheme allowing for the best risk-adjusted returns. Rather than rely on a single set of assumptions, the methodology Bourqui’s team applies is designed continuously to question the basis for investment based on both established processes and other sources of information.
IPE hat in ihrer aktuellen Ausgabe von November 2017 einen Schwerpunkt auf Aktualitäten aus der Schweiz gelegt. Barbara Ottawa schreibt “Goodbye AV2020” und zitiert eine Reihe prominenter Vertreter der Schweizer Vorsorgeszene dazu. Susanne Rust nimmt die katastrophale Verfassung der Genfer Kasse mit ihrem Sanierungspaket von 4,7 Mrd. Franken intensiv unter die Lupe. Von Ottawa wiederum stammt der Beitrag “On Pause” zum Thema “Standardisierung” für einen besseren Vergleich der Finanzierungssituation resp. der Risikofähigkeit von Vorsorgeeinrichtungen. PPCmetrics hat dazu eine Studie verfasst, weitere Schritte hat der Bundesrat im Rahmen des Postulats Vitali aber abgelehnt. Eine ähnlich vertiefte Behandlung der Frage findet man in den Schweizer Medien vergeblich. Weitere Beiträge sind dem Thema Rendite und steigende Anlagerisiken gewidmet. Dazu gibt es ausführliches Zahlenmaterial zu den Asset Managers.
Blockchain. What is it good for? Absolutely everything, reply the blockchain cheerleaders, who see no end to the possibilities it presents. Absolutely nothing, say the blockchain deniers, who view it as a technological solution in search of a problem.
While its champions see it as a panacea, a cure for all imaginable ills, and some as yet unimaginable, the deniers see blockchain as a Wizard of Oz, all smoke and mirrors distracting attention from its nothingness. Or they chorus that the blockchain emperor wears no clothes. Readers are, of course, free to substitute their own preferred metaphor for style over substance.
- Opinions on the usefulness of blockchain vary widely.
- The transparency of blockchain, where everyone can see the ledger, creates problems related to lack of privacy.
- The system could prove costly and difficult to implement.
- Its main advantage is providing an immediate and immutable record of transactions.
Ueli Mettler und Benita von Lindeiner (c-alm) gehen in der IPE auf die hierzulande heiss umstrittene Frage der Vermögensverwaltungskosen ein. Sie schreiben u.a.:
Interestingly, disclosed costs have not only shown a strong increase from 2012 to 2013 – but have also, albeit to a much lesser degree, risen significantly from 2013 to 2014. This increase was probably partly the result of a lack of experience and less particularity on the auditors’ part – the first implementation of the new regulation was treated as a kind of grace period especially with respect to explicit transaction costs. At the same time, however, data show that the share of (expensive) alternative investments has risen from 6% in 2013 to 8.2% of total assets in 2015 – probably also accounting in part for the observed cost increase since 2013.
By now, only 7.2bps remain between disclosed costs and total cost measured in the cost survey. This difference can be attributed to implicit transaction costs such as spreads and to transaction and tax costs within collective investment vehicles.
The new cost regulation is considered to be highly successful both within Switzerland and abroad. Over 80% of formerly opaque costs are disclosed in the annual results today in a coherent, relatively simple and comprehensible way. All cost information is based on unambiguous and audited reports, ensuring full comparability with respect to level and quality.
Pension schemes are paying their active investment managers up to 70% more than six years ago even though average fee rates have dropped for most asset classes, according to consultancy LCP.
For an active global equity mandate that had matched the return of the global equity index, an investor could be paying up to 70% more in fees than they had been in 2011, LCP reported in its latest Investment Management Fee Survey.
It said this highlighted how active managers were rewarded for simply retaining assets, and not necessarily making above-benchmark returns.
The report’s author, Matt Gibson, partner and head of investment research at LCP, said: “Investment managers have done very well out of increases in assets under management over recent years.”
Olivier Deprez, a pensions expert and a member of the board of the Swiss actuarial association, argued passionately in favour of supporting trustee boards address funding problems, even if it means, in his words, “adjusting” pensions already being paid. “There is only one entity responsible for the financial security of pension funds and that is the board of trustees,” he stressed.
He called upon the Swiss pension fund association, ASIP, to support a lowering of pension benefits by funds trying to shore up their financial stability. Addressing the director of the association, Hanspeter Konrad, Deprez continued: “When the entity responsible for the pension fund is trying to find solutions to the benefit of active members and beneficiaries – including involving existing pension benefits – then ASIP has to support this approach.”
Konrad had earlier spoken against cutting pensions already in payment, saying that this was a fundamental question that went to the heart of the pension system and needed to be decided at the political level. It cannot be dealt with without a “fundamental debate about whether this systemic correction is wanted” taking place, said Konrad. Deprez disputed the reference to cutting pension payouts, preferring to refer to “adjusting” benefits.
Thomas Schönbächler, chief executive at BVK, the pension fund for employees of the canton of Zurich, argued that it wasn’t right “to change the rules in the middle of the game”, but that levels for new and future pension benefits should be set at the correct actuarial level – which would mean lower payments for future retirees. Konrad took a similar stance, saying ASIP was not against the introduction of flexible pension models for new and future beneficiaries, but that cutting pensions that were promised at a certain level is “the wrong way” for pension funds to address funding difficulties.