More than two thirds of Swiss pension funds take at least half a year to implement a new asset class into their portfolios. One third of funds even take a year or more. While almost 80% of pension funds have a separate investment committee in place, only 58% of members in these committees have a background in investments, and the committees meet less than five times per year on average. These are some results from Mercer’s new Investment Delegation Survey 2021 which analyses investment practices, challenges and opportunities of Swiss pension funds. 46 funds have participated, representing a total of 154 billion CHF in assets under management (AuM).
The survey shows that Swiss pension funds have a big opportunity to further professionalize their investment programs. While many of the foundational structures are in place, these are not elevated to the level needed to navigate a volatile market environment: After the investment strategy and strategic asset allocation are defined, pension funds and investment committees need to ensure that their strategies, tactics and approaches stay relevant and can be adapted to changing markets and risk/return needs in a fast, efficient manner. Delegating parts of the investment process could help ensure a stronger governance.
The survey sheds further light at the resource constraints many pension funds encounter on a regular basis. When asked about what they spend most of their time on, the pension funds surveyed mentioned actuarial issues as the main category. Another symptom of these time and resource constraints might be the fact that 44% of the surveyed pension funds do not have a planned schedule when to rebalance their portfolios, while 7% only rebalance once every year. 40% of pension funds follow an opportunistic approach.
We see a clear case for more investment delegation in Switzerland. On the one hand, it can help ease the pressure on pension funds and free up time for more strategic topics. On the other hand, partnering with an experienced provider can open up an array of new opportunities, especially in asset classes that are typically difficult to access, such as private markets. In addition to gaining access, investors can often benefit from lower fees and a streamlined, efficient implementation.
While there are still areas for improvement, the survey also shows that Swiss pension funds are not opposed to delegation. 91% of survey participants stated that they delegate at least one element of their process fully or partially. Most commonly it is performance reporting (76%), along with other operative tasks like rebalancing and manager monitoring (both 48%). Looking at strategy and implementation, portfolio construction within asset classes, portfolio transition (both 48%) and setting strategic objectives (46%) see some level of delegation.
It is promising to see that Swiss pension funds are open towards delegation. However, when we look at the challenges highlighted in our survey, both in terms of investment efficiency and resources, it seems many funds are not reaping the full benefits delegation can offer and maybe treat it more as a tactical measure for very specific tasks or with a very limited scope.
You can access the full survey results on our website.