Swiss pension funds are increasingly looking to invest in the domestic economy through private equity, although a limited range of vehicles and regulatory barriers continue to constrain capital flows into growing local companies.
Last month, Swisscanto launched its Private Equity Switzerland Growth II L-QIF fund, the latest in its private equity programme, targeting unlisted Swiss companies with innovative technologies and scalable business models in several sectors, including healthcare, industrials, and information and data services.
A Swisscanto spokesperson confirmed that several Swiss pension funds have already committed to the new fund, which is aiming for a first close of around CHF150m (€160m) as early as the third quarter of this year, driven by strong investor demand.
The fund marks the third strategy in Swisscanto’s private markets offering, following the fully subscribed Swisscanto (CH) Private Equity Switzerland Growth I, and Swisscanto (CH) Private Equity World Carbon Solutions I, which closed in October 2023 with commitments of CHF130m.
Follow-up programmes for both existing Swisscanto private equity strategies are already being planned, the spokesperson said, highlighting growing institutional appetite for Swiss-focused unlisted equity.
Swiss pension funds are drawn to domestic private equity partly for portfolio diversification, particularly those with a predominant allocation to Swiss franc-denominated assets.
“It is important for pension funds to have easy and transparent access to the private equity [through] diversified collective investments that meet institutional and regulatory standards. Innovative companies require significant capital for growth,” the spokesperson said.
Seeking suitable vehicles
Consultancy Complementa also sees a growing, albeit still limited, number of pension funds targeting Swiss-focused private equity and infrastructure investments, while noting muted interest in Swiss private debt strategies.
One reason for this could be the historically limited number of suitable investment solutions, said Andreas Rothacher, senior investment consultant at Complementa. Another current factor may be the already high home bias in equities, bonds, and real estate among Swiss pension funds, he added.
However, product development is accelerating. New initiatives such as the Deep Tech Nation Switzerland Foundation – established by UBS and Swisscom to mobilise CHF50bn in venture capital – are helping to expand the opportunity set in private debt and venture capital, he said.
According to Rothacher, Swiss pension funds might consider Swiss private market allocations as a “satellite” exposure, particularly if their overall home bias is not excessive.
PPCmetrics estimates that Swiss pension funds allocate around 2.5% of assets to private equity, mostly in global strategies, despite the introduction of a domestic private equity and private debt category in 2022.
Allocating to Swiss private equity requires more resources because of added complexity, which may explain the relatively low uptake, said Romano Gruber, team leader for asset manager selection and illiquid assets at PPCmetrics.
Other deterrents, Gruber said, include constrained risk budgets and a lack of institutional-grade products. However, the advantages of domestic private equity include the absence of currency risk and the relative political stability of the Swiss market.
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