Erich Solenthaler casts a cold eye on the scene
Over the past 12 months, PPCmetrics appears to have won a clear victory over its competitors. The new but large pensions funds set up by Swiss Rail, Swisscom, UBS and PKB, the fund for federal employees, have chosen the Zurich-based consultancy group as their lead advisers.
To the market’s surprise even PKB divorced from Ecofin, the consultant it had used since 1997 to draw up its strategy.
Cost was one of the reasons why Switzerland’s biggest plan shifted to PPCmetrics, another was this consultant was the only that was able to pilot this supertanker to sea in just six months.
Even though no consultant publishes figures, it is understood that PPCmetrics is by far the market-leader. The firm advises 200 plans, says chief executive Werner Strebel. But most of these in revenue terms are smaller funds, he points out, wanting to minimise the firm’s dominance in the Swiss pension world. There are 11,000 funds altogether, he adds, which still leaves something to go for.
He may be right, as there are countless one-man advisory businesses and accountants assisting smaller funds. But PPCmetrics is only one of a handful of consultants that can meet the needs of big pension funds.
Vevey-based Coninco, for example, has a strong presence in French-speaking Switzerland. It will soon announce a merger with the Zurich- based actuary Allvisa, according to market rumours. Coninco is not only strengthening its actuarial and consultancy services aggressively, it is also expanding in Italy and France, as its chief executive Olivier Ferrari says.
Complementa, which is based in St Gallen, has a strong focus on the performance monitoring and control of investment portfolios, and is broadening its range of services.
Public funds are the preferred target of Ecofin in Zurich. Because these schemes are highly exposed to the public gaze, they have a strong demand for fine-tuned, secure and well thought-out structures. So Ecofin has developed the reputation of being something of an ‘academic club’, though this is an image that the firm always resists.
Ecofin has also an established position in advising private companies and the financial industry,but its presence is less strong when it comes to private pension funds. However, because public plans have the biggest need for reforms, Ecofin does not have to fear for the future.
Foreign consultants are mainly advising foreign companies wanting to have the same consultants worldwide. But has been a long haul for them to gain the business of Swiss schemes.
Thanks to the performance-measurement of the KGAST-fonds, Watson Wyatt in Zurich has obtained public recognition, but it may lose this mandate if quality is not upgraded.
The experience of the operations of Chuard Towers Perrin in Berne shows how difficult it is to introduce new models into the Swiss market. The group is offering highly sophisticated asset/ liability studies that offers plans a different approach to risk and can reduce reserve requirements. But when it comes to the crunch most schemes turn away because hidden costs hurt less than a bill.
This summer, Frank Russell closed its office in Zurich, although it was the best established foreign consultant and had earned a reputation for advice in the private equity area and foreign manager searches. Its Swiss office managed to successfully combine the advantages of a world-wide company and a committed, local management. The group was strong in special mandates, but perhaps did not meet the full range of consultant services needed locally, although this was the aim. In addition, continuity was hit when some managers quit.
Most pension funds operate with just one consultant only and very few schemes work with a number of advisers. But consultant shopping might become more common as investments get more international and complex. This trend may also give foreign consultants more opportunities in the Swiss market.
But since 1996, consultants have seen their position in the pensions market immeasurably enhanced. This was when new laws increased the responsibility of pension fund boards and executives for fund performance, risk-levels and internal organisation. As a consequence, the consultant has almost become king within the second pillar. Nowadays, new boards will not take any major decisions without the nod of their adviser.