Swiss Pension Fund Industry Dynamics and Challenges: Is imprinting at founding responsible for a slow rate of change in asset allocation?

Abstract

Solid pension funds are crucial for both individuals and society. They play a vital role in ensuring the financial well-being of retirees, reducing the burden on public resources, contributing to economic stability, and acting as significant investors in the financial markets. This research analysed whether the initial economic conditions during the introduction of the Swiss Federal Occupational Pensions Act (BVG) in 1985, marking the beginning of the modern Swiss pension fund era, led to an im-printing effect on Swiss pension funds and collective foundations, potentially nega-tively influencing the rate of change and returns on invested capital. While the underlying theory of imprinting in the context of corporate demography has been supported by various research in different industries, it has yet to be applied to Swiss pension funds and collective foundations.
The author of this project first conducted a preliminary study with professionals from the Swiss pension fund industry in 2018. The pilot study can be found at the end of this research paper (Appendix 5). As the study progressed, he was inspired to examine the pension fund consulting industry's influence on asset allocation in Swiss-based pension schemes. When working through the final "Investment Consultants Market Investigation" report by the U.K. Competition & Market Authority, U.K. was immediately captivated by the potential impact of pension fund consulting firms on pension funds' investment processes.
He then expressed confidence in the feasibility of accessing elite senior pension policy leaders by strategically refining the research questions and prioritising the acquisition of valuable insights. Leveraging personal contacts within the industry helped facilitate access to a select cohort of prominent participants. The interview program was designed to examine the roles of 14 distinguished industry experts within the Swiss pension industry, with the data collection process structured in two distinct stages. The first stage consisted of a pilot study conducted in the second half of 2018. The second stage involved semi-structured interviews with leading pension fund management experts within Switzerland and Liechtenstein.
This research endeavours to offer a novel exploration of the intricate dynamics inherent in Swiss pension fund management. The findings of this thesis indicate that a considerable number of elite pension fund experts engaged in this study demonstrate a pronounced inclination to affirm established institutional asset allocation paradigms. This tendency is exacerbated by a shortsighted outlook, which seems largely influenced by existing regulatory frameworks and external and internal reporting guidelines. These factors may significantly influence their decision-making processes and overall investment strategies. Consequently, and due to their conservative asset allocation strategies, the earnings potential in their pension funds is not fully exploited.
This dissertation offers five strategic recommendations to significantly enhance the long-term performance of pension assets in Switzerland and strengthen policyholder trust. These recommendations include adjusting the current asset allocation to align with prevailing market conditions, utilising the existing regulatory framework, and professionalising the boards of trustees in pension funds and collective foundations.