Energy, Agriculture, Finance
Investor portrait: Pension Fund NEST
The success recipe of responsAbility investor and Swiss pension funds with “best return over 10 years”
As an investor of responsAbility managed funds, Nest Collective Foundation has received the top award ‘best investment return over 10 years’ in the Switzerland-wide pension fund ratings 2016. Dr Peter Bergier, member of the Board of Trustees of Nest Collective Foundation, explains how.
What is the secret to the Nest Collective Foundation’s success?
It is, without doubt, the well-diversified structure of our portfolio, which includes several lucrative asset classes and strong positions in equities and alternative investments.
We invest in private equity, private debt, insurance-linked securities and equities and have placed a consistent focus on sustainability for the past 33 years.
In recent years, this approach has protected us against problems in areas such as commodities trading.
We will undoubtedly have missed a few investment gains but, overall, our approach has enabled us to deliver the most successful performance in Switzerland over 10 years.
How do you identify attractive investment opportunities that meet your criteria?
For each individual area of investment, we work with professional advisors, from Switzerland but also from the UK or New York, who are highly specialized in that field.
Detailed due diligence is performed before every investment. We have, for example, been especially successful in the global equity market, where we search for sustainable equities on a targeted basis.
In terms of alternative investments, we have made infrastructure investments in senior secured loans – private debt investments that generate higher yields than normal investments but also entail a higher level of risk.
To what extent does your investment philosophy reflect your claim that you focus on the long term?
It reflects it very strongly. The carbon risk in the Nest portfolio has been significantly reduced through our consistent focus on sustainability, and CO2-intensive companies are largely excluded from the portfolio.
As a result, the CO2 intensity of our equities portfolio is 50% lower than that of the global equity index. The advantage of this is that the risk in terms of future CO2 costs is significantly lower.
How has the low interest rate environment influenced your investment approach?
Traditionally, part of our portfolio was invested in bonds. Since they currently generate zero or even negative returns, we have had to look for alternatives.
Consequently, the equity component of our portfolio has increased and 15%, or CHF 351 million, of our portfolio is now allocated to alternative investments.
What was your motivation for investing in investment vehicles managed by responsAbility?
Like in all other areas, we discovered this investment opportunity after it was recommended to us by advisors.
After performing thorough due diligence, we invested in funds managed by responsAbility and have since increased our level of investment.
An exact review of the company revealed a high degree of similarity between its approach and our investment philosophy. And, in the case of responsAbility, I have the feeling that this philosophy is put into practice every day.
You have also visited certain financial institutions that are included in responsAbility’s portfolio and you know how they work. How do these investments fit with your portfolio?
They fit very well. We have the impression that the microfinance institutions are run in a serious manner. Their offering enables SMEs to flourish.
These financial institutions are making an important contribution to development – and that is a good thing and is in line with our philosophy.
This globally diversified portfolio of investments is also convincing from a risk perspective.
What are your expectations regarding the performance of your investments?
We have a 10-year investment horizon. Over this period, we expect the private equity investments that we make with responsAbility to generate an average performance of 4-5% annually.
What are the next steps for the Nest Collective Foundation? Where will you be in 15 years?
Nest was established 33 years ago, when private occupational pension provision was introduced in Switzerland. We have since grown by an average of 10% per year and now serve more than 3,000 SMEs.
I am confident that we can continue this success story. By 2030, we should be serving around 5,000 to 6,000 companies and be managing CHF 5-6 billion of invested capital.
Nest Collective Foundation as at 30.06.2016
|Members||3,078 companies with 19,872 insured|
|New members||98 companies with 842 insured joined the pension fund in 2016|
|Assets: pension recipients||14.1|
|Invested capital||CHF 2,119 billion|
|Investment performance||Since 1 January 2016: 1.69%|
|Coverage ratio||111% (unaudited)|
|Interest/2016||1.75% on total assets|
|Technical interest rate||2.5%|
|Technical basis||VZ 2010/generation tables|
|Conversion rate/2016||6.6% on total assets; to be reduced to 6.2% by 2020|
Past Performance is not a guarantee or indicator of current or future performance.This data is purely indicative and is not a guarantee for future results, and there can be no assurance that the fund/portfolio will achieve comparable results.