Switzerland’s investment guidelines look set to be amended in the coming months in a move towards Anglo-Saxon prudent man principles.
Currently Swiss law stipulates that a maximum of 25% be invested in foreign equity with a 30% ceiling applied to Swiss equity. The sum of either should not exceed 50%, and real es-tate and equity assets should represent no more than 70%. Foreign assets in any scheme should not pass 30%.
Hansjörg Herzog, managing director, institutional clients at Credit Suisse Asset Management and present on the asset management committee of the country’s BVG (Bundesgesetz über die berufliche Alters, Hinterlassen und Invalidenvorsorge) pensions law association, which is looking at the guidelines, says: “The rules are conceived as strict, but our belief is that they are not really. However, the BVG is trying to alter the rules, and is in the process of doing so at present, towards prudent management on the basis of ALM studies and the risk capabilities and willingness of the fund to unterake these studies.”
Herzog says the committee would like to see the present exception rule become accepted as an ‘enlargement’ rule. “The emphasis needs to be on safety first, in the sense that all investments should have a low credit risk, and we want to have this changed to a risk assessment of the entire portfolio.
“We are also looking at increased allowance of private equity which we feel should be open to everyone ac-cording to the individual risk criteria, because the interest is certainly there.
“A few schemes are invested in hedge funds also and the law on alternative investments is in the process of changing and could do so by July 2000 next year.”
Giacchino Puglia, consultant at Watson Wyatt, comments: “The guidelines are not hindering pension funds at the moment, because most are well within the limits. However, psychologically they create a market effect and so are outdated and need changing.
“The limitations give people the wrong impression of security, be-cause you can have a pension fund invested at 50% in equities and this could be too much in comparison to the liability profile. The real question should be one of due diligence and seeing what a pension fund can afford.
“The Swiss/global equity ratio is one of the main issues, because there is little evidence today for the home bias we have in Switzerland. The sensible way forward is to persuade funds to take a more global approach.”
However, Puglia believes a more im-portant issue needing to be restricted is the loaning of pension fund money to companies and for employee mortgages which he says are out of step with the function of a pension plan.” Hugh Wheelan