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Switzerland's BVK to re-tender 'large part' of portfolio

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SWITZERLAND - The CHF21bn (€16bn) Swiss public pension fund for the canton of Zurich, BVK, is set to re-tender some of its mandates but will leave its strategic asset allocation in place, IPE has learned.

The fund's former head of asset allocation, Daniel Gloor, arrested for alleged fraud in 2010 and subsequently dismissed from his post, stands accused of taking bribes worth CHF1.5m (€1.1m) between 1997 and 2010.

Thomas Schönbächler, head of the BVK's management board, said the fund had planned a review of some investments at the end of 2009 to assess portfolio costs and added that the fund will now tender "a large part" of its assets.

He also confirmed that the fund's relationship with its consultant, St Gallen-based Complementa, is under review as part of a discussion on the "basic set-up", as well as due to the long-standing nature of the arrangement.

Following Gloor's arrest last June, various recommendations were made about the structure of the BVK but the fund itself was cleared of wrongdoing.

Schönbächler pointed out that three additional staff positions, created by Zurich cantonal government last year, have either already been filled or will be shortly. However, the names of the new employees in the risk management and the real estate department are not yet being disclosed.

He also claimed that the risk manager hired earlier this year will help to strengthen the internal risk management, which in turn "will help to assess contracts in more detail".

"The former head of asset management was not responsible for the strategic asset allocation and we have a valid SAA in place until 2012," Schönbächler added.

As for the BVK's recovery measures, the Zurich canton parliament will have "the last word" and it is expected to make a decision by this summer.

Regarding the structural reform on a federal level, which has been criticised by many industry representatives, Schönbächler noted that little would change for the BVK because of its size and governance structures already in place.

"There is a certain tendency towards over-regulation," he added.

He said he would like to see clearer definitions on how costs are reported, as it is currently difficult to compare internally managed assets with external mandates due to a lack of cost transparency in funds.

One part of the structural reform that would affect the BVK is the suggestion to only allow financial service providers regulated under Swiss law.

"This is not cost-efficient and we have to be able to use economies of scale instead of reducing the number of market participants," Schönbächler explained.

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