Pension fund investments in Switzerland are governed by the Ordinance on Occupational Retirement, Survivors' and Disability Pension Plans. According to its provisions, pension funds must spread the risks when investing their assets. Pension funds are only authorized to invest in all known forms of investment (eg, cash, bank or postal accounts, bonds, convertible bonds, warrants, shares, dividend right certificates and commercial and residentialreal estate). Swiss pension funds may only invest in derivative instruments that are derived from allowed investments. The financial solvency of the counterpart and the degree which these instruments are negotiable must be taken into consideration, along with the financial peculiarities of each derivative instrument.
The provisions concerning security and spreading of risks, indirect placements and permissible investments have recently been modified to account for the development of the financial markets. The amended provisions took effect on April 1 2000.
With regard to indirect placements, assets of a pension plan previously had to be invested in Swiss investment funds or Swiss investment companies. By replacing the term 'indirect placements' with 'collective placements', the modified ordinance expands pension fund investment possibilities to include foreign investment funds and collective portfolios of banks.
The new Article 59 of the ordinance also extends these possibilities to more unusual investments, such as private equity or hedge funds. Furthermore, under specific conditions investment plans may also invest outside of the individual and overall investment limits prescribed by law. Pension funds may now exceed these limits on the basis of an investment report, which must expressly mention the extended investments. Pension funds that make use of this opportunity must draw up an annual investment report, which expressly mentions the extended investments. The report must demonstrate that the pension fund's objectives and principles of investment are maintained and, in particular, that the principles of security and spreading of risk are duly respected. These investment agreements must be submitted to the supervision authority, which can take the necessary measures in case of violation of the law.
For further information on this topic please contact Thomas Keller or Guy-Philippe Rubeli at Pestalozzi Lachenal Patry's Geneva office by telephone(+41 22 80 94 500) or by fax (+41 22 80 94 501) or by e-mail ([email protected] or [email protected]). Alternatively, contact Robert Furter at Pestalozzi Lachenal Patry's Zurich office by telephone (+41 1 217 91 11) or by fax (+41 1 217 92 17) or by e-mail ([email protected]).
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