Staying true to your investment strategy in a collective foundation

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The option of an individual investment strategy makes it easier for companies to liquidate their own foundation and place their pension assets in the hands of a collective foundation. With both the asset allocation and the asset management remaining in place, high transaction costs can be avoided and the employee benefits unit retains full control over its assets.

A growing number of companies want to outsource the administrative work involved in occupational pension schemes. The numbers confirm this trend, with 72 percent of employees now insured with collective foundations, most of them as part of a pool solution. 

Transfers entail high transaction costs 

Although pool solutions offer many advantages, there is a catch: as a rule, the pension capital must be contributed in cash, and the collective foundation subsequently invests the capital in accordance with the guidelines of the pool solution. The employee benefits unit is thus forced to sell its investments, with high transaction costs arising in the case of illiquid asset classes such as real estate. 

Years of low interest rates have led to a sharp increase in the proportion of real estate assets in portfolios. In some employee benefits units, real estate now accounts for a third or more of the portfolio. Selling costs are therefore high. The sale of private market investments can also be costly. Substantial expenses are incurred across all asset classes. 

Straightforward integration with maximum flexibility 

An individual investment strategy eliminates these transaction costs. The employee benefits unit can transfer its portfolio to the collective foundation together with the current asset manager. Illiquid long-term investments such as real estate, private equity or infrastructure investments do not have to be liquidated. This simplifies processes for the transfer to the collective foundation. Besides, the house bank can also be retained. 

As a result, the investment strategy remains aligned with the obligations of the company’s own employee benefits unit. The company can remain true to its principles – for example in terms of sustainable investments – and no dilution occurs as it would in a pool. In this respect, the solution is very similar to an autonomous pension fund.  

One third of the total assets are managed individually 

With GEMINI, clients can opt for an individual strategy if they have investment assets of CHF 10 million or more. Of the total of 288 employee benefits units, 32 are currently working with an individual solution. In recent years, the share of individual investment strategies has increased disproportionately compared to the pool solutions. The affiliated companies now manage assets of over CHF 1.4 billion based on this model. This figure corresponds to approximately one third of the total assets of our collective foundation. 

This shows that our solution is responding to a real demand. Individual investment strategies allow employee benefits units to retain existing investments, especially real estate. At the same time, the benefits units have free rein in their asset allocation. Companies can thus continue to set their own priorities independently of the collective foundation’s investment decisions, for example in terms of specific sectors or alternative investments, such as infrastructure assets. 

The full-service package does not suit everyone  

Employee benefits units opting for an individual investment strategy need the expertise to manage the strategy with foresight. In our experience, there are quite a few capable of doing so. Under this solution, employee benefits units which are institutional investors by conviction can remain true to their principles within the framework of the collective foundation.