Swiss Pension Vehicles Secure Greater Investment Flexibility

The Swiss federal government has approved rules that will grant Swiss collective pension foundations more investment freedom.

Changes to the regulation governing the investment foundations – Anlagestiftungen in German and fondations de placement in French – will come into force on 1 August this year.

The new rules expand the foundations’ investment opportunities and flexibility. They will be allowed to offer mixed portfolios with a higher allocation to equities and alternative assets, as long as this is made explicit.

Under the current regulations, foundations offering mixed portfolios cannot exceed a 50% equity allocation. They also face restrictions on diversifying into alternative asset classes.

The government noted that a revision of the rules had become necessary in light of increased demand for higher equity allocations, which was “understandable given the low interest rate environment and legally also permitted”.

At least some of the changes were made to allow the investment foundations to better compete with mutual fund providers.

The incoming rule changes also relate to the governance of investment foundations. They reinforce the investor meeting as the supreme governing body of the investment foundation. In future it alone will be responsible for electing the board of trustees.

The announcement of the final changes comes around nine months after draft amendments were proposed for consultation in September. On Friday the federal social security department said the draft text had largely been well received.

KGAST, an association representing the investment foundations, welcomed the changes, saying that adjustments to the regulation had been “important and urgent”.

CEO Roland Kriemler said the association was relieved that the discussion about various unsuitable rules for investment foundations had come to “a successful end” with the government’s edict.

However, he warned there were still two fixes that needed to be made, as investment foundations were at a disadvantage relative to mutual funds with regard to value-added tax and stamp duty.

Swiss investment foundations have a history going back to the 1960s, but they were only codified in law in 2010. Swiss pension funds pool their assets in the vehicles to invest in certain funds or direct investments.