Swiss associations push schemes to unlock private market investments

The Asset Management Association Switzerland (AMAS) and the Swiss Private Equity & Corporate Finance Association (SECA) are calling on pension funds and insurance companies to unlock investments in private markets to support the domestic economy.

Institutional investors, including pension funds, could explore opportunities offered by private market investments to diversify portfolios, and at the same time contribute to support Switzerland’s economic growth and innovation, while remaining aligned with fiduciary duties, the associations said in a recent report – Private markets in Switzerland: Scaling innovation and growth — published today with Boston Consulting Group (BCG).

Swiss pension funds are one of the main investors in private assets but tend to diversify allocations geographically.

For example, the pension fund for the hospitality industry, GastroSocial Pensionskasse, with an investment portfolio of CHF10.5bn, focuses on the lower/middle-market direct lending in Europe, the US, and Asia to invest in private debt, on regional and global fund-of-funds middle-market strategies to invest in private equity, and similar strategies to invest in infrastructure, according to the study.

The scheme has increased strategic allocation targets for private market investments now representing roughly 25% of its portfolio, including 7% in private debt, 3% in insurance-linked securities, 5% in private equity, 7% in infrastructure equity, and 3% in private global real estate, it added.

Lausanne-based public institution Retraites Populaires, which manages the pension fund for the Swiss canton of Vaud (CPEV) and Caisse Intercommunale de Pensions (CIP), with assets amounting to CHF30bn, has a Luxemburg fund structure to manage illiquid investments.

It invests in private equity mostly in the US, and it is considering adding private credit to its portfolio, according to the report.

Asset managers in Switzerland manage around CHF360bn in private market investments, with the largest share in private equity (CHF260bn), followed by private credit and infrastructure investments (CHF50bn each), it added.

Swiss managers invest 75% of the assets on behalf of foreign investors, with the largest inflow of capital coming from Germany, the report added, highlighting how investors steer clear from a home-bias approach.

Tobias Würgler, co-author of the report, said that growth capital for emerging and established companies in Switzerland is limited, forcing firms to look at other markets such as the US.

’In addition, regulatory restrictions and cultural factors [in Switzerland] hinder the full realisation of investor potential,’ he added.

Private market investments remain a critical source of capital to support the domestic economy and companies’ growth, innovation and job creation.

Therefore, the associations are calling on Swiss pension funds and other asset owners to create a framework for companies to scale up, with a crucial role played by the academic institutions building skilled workers and providing fertile ground for spin-offs.

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