mast image

Special Report

ESG: The metrics jigsaw

Sections

Compenswiss moves to tackle mounting cashflow problem

Related Categories

The CHF34.3bn (€30bn) manager of Switzerland’s social security funds has decided to step up its selling programme to guarantee pension payments.

Compenswiss said it had no other option but to increase asset sales from CHF100m to CHF125m per month, or CHF1.5bn for the current year.

Compenswiss introduced the “systematic divestment programme” in 2018 in the face of a shrinking asset base. Switzerland’s ageing population and other demographic developments were increasing the size of the fund’s negative cashflow problem with every year, it said.

Switzerland’s federal social security office has calculated that the AHV/AVS fund, which is for first pillar pensions, will run out of assets by the end of 2030 if no measures to address the funding imbalance are adopted before then.

Compenswiss posted a net loss of 4.2%, or CHF1.5bn, for 2018, it announced today. In total, assets under management shrank by CHF2.5bn to CHF34.3bn, which it said was due both to the negative financial market developments and the gap between income and expenditure, in particular in the AHV/AVS fund.

In contrast to the previous two years, 2018’s financial performance could not offset the negative cashflow in the pension buffer fund, Compenswiss said.

The net result for the AHV/AVS fund was a loss of 4.1%, while the disability and income compensation insurance funds posted losses of 4.1% and 4.2%, respectively.

In 2017 the pension buffer fund gained 6.8%. At 0.2%, total operational and asset management costs in 2018 were stable compared with the previous year, Compenswiss said.

The Swiss government has proposed various measures to stabilise the state pension buffer fund’s financial situation, leaving these decoupled from occupational pension reforms in an attempt to avoid a repeat of the failure of the Altersvorsorge 2020 reform attempt. This was a reform package for the whole pension system.

In May the Swiss electorate will vote on a proposal to provide the AHV/AVS fund with CHF2bn of extra funding a year, although this is linked with corporate tax reforms.

The referendum is taking place after campaigners gathered more than 55,000 signatures against the package. They argue that the proposed corporate tax measures are essentially the same as those that were rejected in a public vote in early 2017.

Related images

  • Zurich, Switzerland

Readers' comments (1)

  • Knowing nothing of the Swiss first pillar -- beyond what I read in the article -- it does seem like Compenswiss should be congratulated for not kicking the can down the road.

    I don't know if it's possible to define precisely what the liabilities are for a buffer fund, but I'd hope that Compenswiss are also looking at their whole asset allocation from an Asset Liability Management perspective.

    Unsuitable or offensive? Report this comment

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2575

    Asset class: Core Real Estate Muli-Manager Separate Managed Account.
    Asset region: Global.
    Size: CHF 150m.
    Closing date: 2019-12-20.

  • QN-2576

    Asset class: Small Caps Equity.
    Asset region: US.
    Size: $>100m.
    Closing date: 2019-12-09.

  • QN-2578

    Asset class: Sovereign Local Currency Emerging Market Debt.
    Asset region: Local emerging markets.
    Size: EUR 950m.
    Closing date: 2019-12-19.

Begin Your Search Here
<