Swiss schemes limit losses from Credit Suisse downfall through diversification, risk monitoring

Diversification of investments and a closer look at risks resulting from business operations at Credit Suisse have helped Swiss pension funds to eventually contain losses from the near collapse of the bank, which was saved by a takeover of rival UBS.

Publica, Switzerland’s largest pension fund, has paid particular attention to the business activities of Credit Suisse in recent years and the numerous scandals that hit the bank.

Its investment committee decided in 2021 to start a direct dialogue with the bank on the topic of “improving corporate culture”. Two meetings took place with top management in 2022, and a third meeting was planned for May this year, the scheme said.

The pension fund has also refused to approve the decisions of Credit Suisse’s board of directors at every annual general meeting since 2016.

The pension fund for the employees of the canton of Zurich, BVK, diversifies its portfolio of investments broadly in more than 5,000 companies. Its investment strategy foresees that Swiss equities should make up 4% of the of the total assets invested. At the end of last year, Swiss equities were slightly below its strategy target, at CHF1.45bn, it said.

Credit Suisse index weight was recently below 0.5%, meaning that the falling prices of Credit Suisse securities last weekend (18-19 March) resulted in low losses for the BVK. Credit Suisse is not a custodian bank of BVK, it added.

The pension fund for the city of Zurich (PKZH) held last week equity and bond investments with Credit Suisse amounting to less than 0.2% of its total assets. The loss on Credit Suisse equity suffered by the pension fund as a result of the takeover – measured in terms of total assets – is very small, at 0.01%, the scheme said.

The broad diversification of assets across many different investments is reducing the risks arising from the takeover of Credit Suisse by UBS, it added.

Moreover, PKZH does not have an open account with Credit Suisse and open derivatives, while the global custodian of the scheme is Banque Pictet & Cie.

The multi-employer pension fund Asga Pensionskasse, instead, relies on the services provided by Credit Suisse for global custody (securities custody), fund management and fund custodian bank, it said.

This means that Asga’s globally diversified securities portfolio is with Credit Suisse, and the assets (other than cash) are held separately from the bank’s balance sheet.

Asga said it started tendering the mandate for these services in the fourth quarter of last year, but the the outcome is currently still open.

Further financial institutions ensure sufficient liquidity flow to Asga “at all times”, the pension fund said, adding that it can continue to pay pensions without restrictions.

Credit Suisse’s equities make up approximately 0.2% of the Swiss equities and total assets in Asga’s investment portfolio, which does not hold the bank’s bonds.

The pension fund for the Swiss postal services, PK Post, said in statement that it is not taking any further measures at the moment in connection with the takeover as the decisions taken by the Swiss National Bank and the government recently provide sufficient protection. UBS is the scheme’s global custodian.

The passive investing strategy of PK SBB – the pension fund for Swiss federal railways – has led to low losses following the fall in price of the Credit Suisse equity shares, but volatility on the market is having an impact on the scheme’s funding ratio, it said.

IPE research

According to latest IPE research on Swiss instutitional assets, UBS Asset Management tops the list of asset managers with the highest Swiss institutional assets under management at €220.7bn, with Credit Suisse Asset Management placed third with €170.3bn (as of 30 June 2022).

Credit Suisse AM claimed to have 170,313 Swiss institutional clients, while UBS AM claimed to have 220,683 Swiss institutional clients, of which 184,189 were pension fund clients.

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