19 November 2015
Study on Swiss pension funds shows importance of external asset managers
- GAM sponsored a comprehensive study on investment principles and decision making processes of Swiss pension funds, representing CHF 220 billion of assets
- Over 60% of the assets analysed are managed externally, underscoring the importance of external asset managers for Swiss pension funds
- 38% of the pension funds plan to increase the share of assets they manage actively
- Pension funds feel over-regulated, wishing for more independence in their allocation decisions
The Zurich University of Applied Sciences (ZHAW) has conducted an independent, qualitative survey of 35 Swiss pension funds, representing about CHF 220 billion of assets under management. The study, which was sponsored by GAM, provides valuable insights on decision-making processes, selection criteria for external asset managers and investment principles of institutional clients in Switzerland.
Almost a third of the pension funds surveyed work with more than 20 external asset managers, aiming to achieve a good degree of diversification in investment styles. Over 60% of the assets analysed are managed externally, underscoring the importance of external asset managers for Swiss pension funds.
Pension funds named performance track record, core competencies and level of specialisation as the most important selection criteria for external managers. Referrals from other pension funds were almost as important.
The pressure to improve returns remains high for pension funds. The survey shows that mortgage lending to private clients is a top alternative for the funds to boost returns. Loans to non-public institutions are also on the rise, as are real estate investments.
About 36% of pension funds surveyed use passive investments for managing more than half of their assets. Pension fund managers said they tend to increase active investments when the markets are good. Some 47% expect to increase the share of passive investments in the future, compared with 38% who said they would use more actively managed products.
More and more pension funds are using a so-called core-satellite approach to managing their assets. Typically in this approach about 75-80% of assets are managed in a core portfolio made of passive investments. The rest is managed through satellite vehicles with the aim to either achieve higher returns through active investments or to lower the risk profile in comparison to the core portfolio.
Many pension funds feel over-regulated, and would like to have more independence in their allocation decisions. They are critical of the fact that there is no clear strategy in regulatory matters. For example, the proportion of alternative investments was raised to 15% a few years ago but then came under stricter regulation in mid-2014. Most criticism is directed at the level of detail in requirements. Many would like regulation to be adapted for different sizes of pension funds.
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