Regulations concerning how pension funds have to operate are increasing the demand for consultancy services in Switzerland.
"These regulations have not been changed in the very recent past, but they are more and more being applied in a fiduciary responsibility way. It is becoming more clearly stated that pension funds have got an active responsibility to establish an investment process systematically and deal with questions like asset allocation and performance measurement," says Mike McShee, managing director at Buck Consultants in Geneva.
"There is a trend away from relying on the investment limits to one that is more based on the liabilities structures of the plan," says John Anthony, managing director of Watson Wyatt in Switzerland. " There is a demand for all types of services, from strategy consulting and ALM to manager selection and manager monitoring."
Historically, a lot of pension Swiss pension funds tended to think that as long as they kept their portfolio structure inside the investment limits they didn’t have to do anything else. Now people consider that the regulations require a more conscious and active approach.
Another big issue which has required consultants advice has been the very low yield available on Swiss bonds. "A lot of people had the mental benchmark that you must earn a return of 4%. If you have a very high proportion of your portfolio in Swiss bonds that are only yielding 3% it becomes extremely difficult to reach that 4% return objective. So we have many pension funds asking what can they do about the bond problem," says McShee
The big and important consulting companies in the investment field are local players such as PPC Metric, Ecofin, Complimenta and Coninco which have been experiencing a very strong expansion of their services and still dominate this area of the market.
Olivier de Denon at Vevey-based Coninco says: "Local players control the majority of the assets in Switzerland. On the investment side, pension funds are looking for useful information, which could be different depending on the client. We’ve seen an increase of investments in equities, with an average of 30%, which is quite a lot for Switzerland.
He adds: "In general, we think the use of consultants is growing because the Swiss law advises us to do so." Paula Garrido