Rapid response to Swissair crisis
Within hours of the collapse of Swissair last October, the powers-that-be at the group’s various pension schemes, worth collectively SFr11bn (e7.5bn) at the time, decided to take action to protect its assets and members. Before the funds could be dragged down with the bankruptcy proceedings and see their assets exposed to any kind of external risk, the management and fund boards of the various funds got together and formed a new independent pension fund administration company, with the former SAirGroup schemes as its core clients.
The new company, based in Zurich, is called PFS – Pension Fund Services – and is an independent pension fund administration company offering full pensions services and products to the pension funds of the former SAir Group pensions; to mid and big-size Swiss pension funds; and other companies on the open market. It has been founded by the three big former pension funds of Swissair APK, VeF and Kaderversicherung.
The speed with which the PFS board and management team got the new concept up and running enabled the former Swissair pension funds to survive without any operational or financial loss, even though the declines in the equity market and pay-outs to employees leaving the group as a result of Swissair’s collapse have seen their value fall to approximately SFr 8bn.
Not one single active member or pensioner lost a penny within the pension scheme after the day of Swissair’s collapse. The quick thinking and subsequent development of PFS not only ensured the survival of the SAirGroup’s funds and their permanent safety, but also their optimised day-to-day management, a smooth production of cash to fulfil all current payout liabilities and – most importantly – their future growth and development.
It wasn’t just the members and pensioners that were saved. PFS’s board and management did not hesitate in taking former staff into the new company. Most of the employees remained in work and PFS got ready made and fully trained personnel from day one.
Parallel to the set-up of the administration company, an institutional mutual fund was developed and built-up to pool as many assets as possible to get the utmost flexibility for future asset transfers, asset allocation changes, and any other kind of asset movement. Between mid-November 2001 and 5 January 2002, the whole structure was successfully established, with the first set of six sub-funds – five indexed funds and one active equity fund – with approximately SFr 1.5bn between them.
Moreover, a parallel institutional fund – for special risks – was created with the support of Unigestion and HSBC for the hedge fund assets worth over SFr 200m. Each individual step of the process was fully approved by the Swiss Banking Commission – which was only possible with the support, experience and appetite for project risk of UBS Fund Administration, which was elected in mid-November by all involved within the creation of PFS as fund administrator.
The Swiss Banking Commission was extremely supportive and worked through the Christmas holiday season to ensure all the funds would be up and running by January.
A legal framework for the case of a big and complicated internationally operating sponsor company declaring bankruptcy and all the implications and effects on the pension plans did not exist at all. The authorities were more than willing to help to elaborate and “define” the law for many new areas in fine detail so PFS knew what the remaining pension funds and PFS could and could not do.
PFS realised very quickly that it wasn’t a question of moving fast, but immediately. Within a few weeks PFS had its structure, teams, investment products, the institutional funds and asset management roster in place, servicing its former clients from day one after the collapse and actively channelling assets into the umbrella funds from January, less than six weeks after the starting point.
Such has been the success of the new independent company, its level of service quality and dedication of the team and its attractive asset management products that some of the former SAirGroup and affiliated companies are thinking of returning to PFS as sponsors, since many of their employees remain in the funds PFS took over.
PFS is already in discussions with some of the former SwissAir companies as well as with some other pension funds about working for it and supporting it in the field of pensions.