ABB to manage other Swiss funds
ABB Pensionskasse Schweiz has moved into third party asset management. It is offering its services to any fund with more than 200 members. The services provided include advising on and undertaking administration, accountancy, investment, communication as well as the overall management of a fund. This excludes insurance products which are still monopolised by insurance companies. Customers can choose all or any combination of the services. The first external client is the Pensionfonds Shell Switzerland which transferred part of its assets to ABB.
Head of ABB PK, Christoph Schenk says the strength of ABB Vorsorge is its practical knowledge of managing funds, having a complete infrastructure and its independence from any financial institution. In addition ABB have become well known by introducing a range of innovative products. According to Schenk, the pension fund was inundated with offers from other schemes seeking a joint venture with ABB. But it is only when we come to make a profit, that we can prove we are as good as we believe ourselves to be", Schenk says. He is optimistic about attracting sufficient customers.
ABB is the first pension fund to approach the Swiss market in this way. Such competition by pension funds did not exist up to now, because Swiss funds are not allowed to canvass other schemes unless the parent firms are economically associated.
But ABB found an astonishingly easy way to get around the legal limitations: It set up 'ABB Vorsorge', a management company which acts under normal business law instead of pension fund legislation. ABB Vorsorge took over all the staff of ABB Pensionskasse, which became the shareholder - and the customer. It is free to collaborate with any other pension fund manager.
ABB Pensionskasse will use the return from the economies of scale and the fees charged to other customers of the management company to reduce its costs.
The three year plan foresees contributions by customers of at about Sfr.0.5m ($0.4m), and additional assets under management should reach at least Sfr1.8bn. The move in to the pension fund market started without employing additional staff.
The Baden-based ABB PK has 20,000 members and has a balance-sheet total of Sfr3.8bn. It re-ported a net return of 13.4% in 1997. Erich Solenthaler"