How the right pension fund investment strategy generates value for companies

The investment income generated by pension funds is often underestimated, although it makes a major contribution to the members’ retirement assets. According to the Asset Management Association, capital markets – the so-called “third contributor” – have added more than CHF 500 billion to pension fund assets since 2004. This figure represents more than one third of total contributions, or around CHF 100,000 per member.

It’s the strategy that counts – decade after decade

A solid investment strategy is the backbone of a successful employee benefits solution. Studies show that up to 80 percent of long-term investment success depends on asset allocation, i.e. the strategic distribution of assets across different asset classes, rather than on short-term timing or individual investment decisions. This is why companies have a lot to gain from taking an active role in shaping their investment strategy.  

The objective of professionally constructed investment strategies is not to achieve rapid growth, but to ensure a constant return on retirement assets and a stable long-term coverage ratio for the pension fund.

How much risk is acceptable?

The amount of investment risk a company’s employee benefits scheme can take on depends on risk capacity, which is reflected by the coverage ratio of the employee benefits unit. A higher coverage ratio allows the employee benefits unit to absorb greater fluctuations and means that the investment strategy can be more return-oriented.

Demographics, structure and capital commitment also play a role: for instance, companies with a high number of upcoming retirements and few new contributions will have a limited risk capacity, and their investment strategy must take this into account.

Pool or individual – what is right for my company?

Collective foundations today offer flexible options to meet a wide range of needs:

• Pool solutions are best for smaller and medium-sized businesses that are looking for tried-and-tested investment strategies.

• Individual investment strategies are geared towards larger companies that have in-house investment expertise or prefer tailor-made solutions.

Not every company can draw on the required investment expertise in-house – nor is this necessary. As specialised advisors, investment consultants assess risk tolerance, assist with strategy selection and continuously monitor investment strategy performance. This helps companies make informed decisions tailored to their specific goals and circumstances.