We spoke with Daniel Gussmann, Chief Investment Officer of AXA Switzerland, about modern pension fund solutions and the challenges posed by the capital market.
Daniel Gussmann, AXA stopped offering full-value insurance in its occupational benefits business four years ago and now only offers semi-autonomous solutions. How is this working out?
AXA made the right move at the right time to put the occupational benefits business back on a solid footing and offer pension customers sustainably profitable solutions. Since the changeover four years ago, customers of AXA's semi-autonomous collective foundations have received more than CHF 2 billion in extra interest on their retirement assets than would previously have been possible with full-value insurance. That figure speaks for itself.
CHF 2 billion more for pension customers is an impressive amount. How is that possible?
Semi-autonomous solutions have much more freedom in terms of investment strategy because they aren't bound by the same strict regulations as full-value insurance. This has opened up entirely new possibilities for us to seize long-term return opportunities for our customers. We completely restructured investments with a value of CHF 30 billion in the space of 12 months when the changeover took place. For instance, we were able to significantly increase the allocation to equities – the asset class with the best return prospects over the long term. This is good news for our customers because it means that their retirement assets can earn much more interest over the long term than the statutory minimum rate of 1% for occupational benefits that normally applies with full-value insurance.
How safe are customers' assets, particularly during periods of stock market volatility?
Capital markets, especially equity markets, are regularly subject to fluctuations. We have a risk-conscious investment strategy with a high degree of diversification. The numbers have to add up over the long term, and our strategies and portfolios are geared to ensuring that they do.
«We got into interesting asset classes like Swiss real estate and mortgages at an early stage and built up considerable expertise in alternative investments such as private equity. That's now paying off.»
Could you tell us more about your investment strategy?
We manage pension assets for more than 40,000 companies in Switzerland. Many of these are affiliated to a collective foundation for occupational benefits. Each foundation's board of trustees decides on its own investment strategy, which we then implement in compliance with the applicable legal restrictions.
We've always taken care to invest our customers' premiums and pension contributions securely and profitably, and it pays off.
Thanks to effective diversification, our portfolios are in very good shape for the future. Our extensive experience with mortgages and direct real estate investments contributes to our portfolios' stability, while our long track record in alternative asset classes like private equity helps us to pinpoint the best possible return opportunities for the foundations and their customers. On top of this, we rigorously employ a contemporary best-in-class approach.
What exactly does «best in class» mean?
We systematically seek out the best investment style and the best asset managers for each asset class. This independent best-in-class approach allows us to find the best possible investment opportunities with the greatest potential to deliver returns for our customers. We take exactly the same approach with our own pension fund. We invest our customers' assets in accordance with the same principles used for our own staff's retirement assets.
«We invest our customers' assets in accordance with the same principles used for our own staff pension fund.»
You have increasingly been offering asset management services to third parties since 2019. How has this business been performing?
It's been performing very well indeed. We've achieved strong growth in assets under management for third-party customers over the past few year. Most of these customers are collective foundations and pension funds. Achieving satisfactory returns has become more and more challenging for them in recent years. Our many years of experience and our size allow us to provide them with excellent support in this problematic capital market environment.
What exactly do you offer pension institutions?
Besides a full range of asset management services that involve developing and implementing entire investment strategies, we also offer bespoke investment solutions such as mortgage investment foundations. These allow pension institutions to diversify their portfolios and generate attractive excess returns relative to bonds.