Despite operating in a period marked by low interest rates from 2014 to 2023, pension funds achieved impressive investment returns, a significant portion of which was passed on to active members in the form of interest on their retirement savings. On average, these cumulative returns amounted to approximately 25 percent, more than double the minimum required by the Federal Law on Occupational Retirement, Survivors, and Disability Pension Plans (BVG).

These and many other figures are featured in this year's «Pension Fund Yearbook», a well-known concultancy in the pensin sector and beyond.

Sustainability Reporting Is in Vogue

The yearbook also reveals that nearly half of pension funds reported on the sustainability of their investments in 2023. PPCmetrics notes a rise in the publication of quantitative ESG metrics for equity and bond portfolios, particularly following the introduction of the ESG reporting standard by the ASIP pension fund associatio. This represents a rise from 11 percent in 2022 to 19 percent in 2023.

Engagement in sustainability through active shareholder rights and dialogue with management or boards of directors,  is more prevalent, with 38 percent of funds adopting this approach. This is higher than the 35 percent of funds that rely on the less intensive strategy of excluding stocks and bonds from non-compliant issuers based on ESG criteria.

Asset Management Costs Decline

For the first time, PPCmetrics has adopted an AI-based analysis of annual reports to identify trends and topics of interest to pension funds. Unsurprisingly, the key themes in 2023 included «funding ratio», «interest rates», «inflation», and the UBS acquisition of Credit Suisse, which are represented in the report as a word cloud.

For those who prefer traditional metrics like funding ratio, technical interest rate, and conversion rates, the yearbook offers valuable insights. It also contributes to a more objective debate on the asset management costs of retirement savings. In 2023, the average reported asset management costs slightly decreased, with the median falling from 0.43 percent to 0.37 percent, and the average costs dropping from 0.49 percent to 0.41 percent.

Small Funds Are Not More Expensive Than Large Ones

The competitive environment in institutional asset management appears to be functioning effectively, though this may not be welcomed by the asset management departments of banks. Furthermore, PPCmetrics found no clear correlation between the size of a pension fund’s assets and the costs reported.

The 2023 yearbook is based on the annual reports of 334 pension funds, which collectively manage 866 billion Swiss francs in retirement assets and cover approximately 4.3 million people.