A 25-year old in Switzerland today would be set for a corporate workplace pension five percentage points lower than that of a compatriot only a few years older, according to a study by Willis Towers Watson. The consultancy’s Swiss arm regularly carries out a benchmarking study of the pension plans of companies making up the Swiss Leaders Index (SLI). This comprises the issuers of the 30 largest and most liquid securities in the Swiss equity market. Companies such as ABB, Julius Baer and Nestlé are currently in the index.
BVK, the CHF31.8bn (€27.8bn) pension fund for the canton of Zurich, has opened itself up to manage pension plans for employers across the rest of Switzerland. Taking on new schemes would benefit BVK’s risk profile and member structure, it said. It would only accept new joiners if this were in the collective interest of BVK’s existing members and affiliated employers.
Swiss voters have thrown out plans to reform the creaking state pension system, highlighting the difficulties even prosperous western European countries face adapting welfare regimes to cope with ageing populations. Authorities pushing the first serious reform of the pension system in two decades had warned that old-age benefits were increasingly at risk as life expectancy rises and interest rates remain exceptionally low, cutting investment yields.
It has, to put it mildly, been a good year for passive investment funds that track a broad market index like the FTSE 100. Much of it has been at the expense of their active peers which try to seek out undervalued investments. Almost $500 billion has moved from the latter to the former so far this year. This keeps up a trend that has seen massive flows from active to passive strategies in recent years and the gradual growth of passive over the last 30 years.
Finland's Varma Mutual Pension Insurance Company— the country's largest pension fund— told Bloomberg it has reduced its exposure to stocks by five per cent, most of that reduction coming from U.S. stocks. "It seems as if there is no president in the U.S.," Varma CEO Risto Murto said. "If I look at what is the moral and practical power, there is no longer a traditional president."
Norway's sovereign-wealth fund, the world's biggest, topped a $1 trillion valuation after the best half-year return in its history. In the first half of 2017, the Government Pension Fund Global (GPFG) made 499 billion kroner ($63 billion), a 2.6% return on its investments, the best half-year return in its history, the fund announced on Tuesday.
Switzerland’s occupational pensions association has decided to back the country’s reform package, AV2020. During its general assembly last week, ASIP announced its support for the proposals agreed in parliament earlier this year, after seeking its members’ opinions on the Altersvorsorge 2020/Prévoyance vieillesse 2020 (AV2020/PV2020) reform package. After considerable back-and-forth, the reform was approved in March. Next, Switzerland’s population will decide on the reform package in a binding referendum on 24 September.
At a meeting last week, CPEG, the pension fund for the Swiss canton of Geneva, has unveiled a set of structural measures to improve its funding level that could have the effect of cutting future pension benefits by up to 15%. The committee which manages the CHF12bn (€11bn) fund (employee, pensioner, and employer representatives) confirmed a plan to raise the age at which members can take a full pension from 64 to 65 as of 1 January 2018. In the same occasion, it released the decision to lower the target pension level. The pension fund said this measure would be accompanied by other technical measures of less importance, but the cumulative effect could be a lowering of pension benefits by up to 15% for active members.
Generally, investing in smaller companies is riskier than investing in larger companies. Large caps tend to be less volatile during rough markets as investors fly to quality and become more risk-averse. The long-term statistics certainly suggest that smaller companies do indeed outperform larger ones. Mid caps lie between large cap stocks and small cap stocks. In Europe the Eurostoxx Mid Index, has historically outperformed the broader Stoxx 600 Index, and in the last bull market started in 2009, the real gap in the performance between the two indexes, started in 2013, as we can see in the graph below where it is represented in the upper side the relative strength of the Eurostoxx Mid Index versus the Stoxx 600 Index, and in the lower side the historical performance of the two indexes.
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