SWITZERLAND - The pension fund for the Swiss canton of Zurich (BVK) should end its long-term relationship with consultancy Complementa, according to legal expert Georg Müller.
The canton commissioned a number of experts to look into the structure of the pension fund after the arrest of Daniel Gloor, the BVK's former head of asset management.
In his report, Müller said he did not see any shortcomings at the fund that would require immediate action to prevent BVK staff from acting illegally.
But he did say the long-term relationship with Complementa, which has been the BVK's investment controller since 1991, had led to "undesirable practices".
Speaking to IPE, Michael Brandenberger, chief executive at Complementa, said it was important to stress that Müller reported there had been no complaints or criticism regarding Complementa's work at the BVK.
"But it is his opinion that the duration of the cooperation has been too long," he said. "It will be up to the BVK to decide whether it agrees."
Müller recommended separating investment controlling from strategy, and awarding mandates more clearly.
The government of the canton of Zurich said it would discuss the recommendations with the management of the BVK, but it added that three additional positions had already been created for the fund, with new staff being recruited for risk management and asset management.
Müller also recommended creating a whistle-blowing office for the entire canton and outsourcing the BVK's revision to an external company.
The two auditors, BDO and Balmer-Etienne, looking into various mandates awarded by the BVK over the last years seconded the call for outsourcing the revision.
They said some mandates had been awarded against the fund's regulations and that, up until the change in management in 2009, tenders had been mostly "very lucrative" for the asset managers.
The companies also warned that dealings with very young or inexperienced managers would require extra supervision.
Both auditors called on the BVK to review the rules for awarding mandates and increase the internal control systems.
However, the reviewers all noted that their reports might have yielded different results if they had had access to the documents currently held by the public prosecutor for the legal proceedings against the former head of asset management at the BVK on alleged corruption.
BDO and Müller will now be looking into the structure of the fund's real estate asset management, which is done separately.
In other news, Thomas Liebi, former deputy head of asset management and interim head after Gloor's departure, is leaving the BVK to join Swisscanto asset management on 1 April as chief economist.