Zurich PFF: Expanding investment horizons

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The InvestmentEurope Pension Fund Forum held at the Swisshôtel in Zurich on 19 November attracted more than 40 delegates to discuss the latest challenges for Swiss pension industry.

As the search for yield drives institutional investors to broaden their portfolio, speakers and participants whether investing in frontier markets or alternatives may be a suitable solution for Swiss pension funds while the afternoon sessions focussed on the impact on the balance of power between board members and directors.

The event was kicked-off by Swiss journalist and host Andreas Valda, he challenged participants by asking whether investing in frontier markets or smart beta could actually be compatible with the perhaps more conservative requirements of Swiss Pension funds.

Christopher Nichols, investment director Multi Asset Investing at Standard Life presented multi asset absolute return strategy as an opportunity to respond to growing levels of volatility. He argued that benchmark agnostic selection offers opportunities to respond to unprecedented bouts of volatility.

Christian Derold, managing director at Morgan Stanley argued that in times of uncertainty, intangible assets represents moats which help to establish value in equities by using a bottom-up index agnostic approach to stock picking. “Key for the sustainability of intangible assets are investments in R&D and innovation in order to maintain the moats and pricing power.

While market volatility has increased with the rise of high frequency trading and the growth of the ETF sector, Dino Davis, institutional portfolio manager at MFS argued that a focus on low volatility stocks could help to match returns with risk reduction.

The first panel debate (pictured) including Adrian Gautschi, partner at Invalue, Ivana Reiss, CEO at Avadis Anlagestiftung Olaf Meyer, president of pension fund Profond discussed one of the key themes of the events, whether classic or alternative investment strategies are more suitable for Swiss pension funds.

From the focus on the Swiss context, Manuel Cañas, senior portfolio manager at First State Investments discussed how the growth of emerging markets pension fund systems could offer opportunities in local currency markets. Cañas argued that reforms to pensions system in Southeast Asia and Latin America had created larger, more efficient markets and structural demand for long-term bonds denominated in local currencies.

Dominik Issler, head of institutional business in Switzerland for Martin Currie, an affiliate of Legg Mason, discussed opportunities in Asian equities using an absolute return strategy, stressing the importance of dividend growth.

From the focus on emerging markets on, Kevin Daly, senior investment manager at Aberdeen Asset Management argued that declining poverty rates and demographic advantages make investments in frontier market an attractive opportunity to boost portfolio diversification.

With interest rates at all-time lows, Alexander Fleischer, head of fixed income at Erste Asset Management in Wien discussed whether there is a distorted perception of price and risks in corporate bonds. He highlighted the importance of risk exposure management indices in order to track down market failures.

The afternoon sessions brought the focus back to Switzerland, with Stephan Wyss, pension fund expert at Swisscanto providing a critical assessment on the impact of two years of Swiss superintendence on occupational pension schemes. He highlighted impact of the Swiss grading system of risk levels on the existing pillar structure.

Another challenge for the Swiss pension system, the imbalance of of power between laymen board members (Stiftungsräte) and more influential directors was addressed by Beat Zürcher, President of the Swiss association for pension fund board members BVG. He stressed that the growth of regulation has put increased pressure on board members.

The second and final debate followed up by discussing whether board members as laymen are even capable to assume their responsibilities. Speakers included Pierre Triponez, president of the Swiss Supervisory Commisssion for Professional Pensions, Hans Zimmermann, president of Ascaro, Hans-Peter Konrad, commercial director of Swiss Pension Fund Association ASIP and Jürg Schiller, instructor for Swiss pension fund board members. Taking into account the challenges for laymen as board members, the speakers highlighted that the parity model introduced should not exclude professionalism.

Further information and pictures of the event can be found here.

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