Report of the Chairman of the Board of Directors and of the Director

The year 2021 was characterised on the one hand by strong economic growth with rising stock market prices and on the other hand by the ongoing pandemic. Against this background, compenswiss (compensation funds AHV/IV/EO) achieved a net return on investments of 5.28% (market portfolio after hedging - previous year: 5.22%).

Total assets increased by approximately 6% to CHF 40.9 billion, of which 55% are managed internally. 

The net return by social insurance was 4.94% for AHV, 4.10% for IV and 5.05% for EO. The difference between the net return on assets and that of the three compensation funds is explained by the liquidity held by each of the Funds, which dilutes the performance. This was most noticeable for IV, for which an additional liquidity reserve was created in 2021 to compensate for higher pension outflows and the increased costs of individual measures. The IV debt to the AHV, which amounts to just over CHF 10 billion, could again not be reduced.

Although the liquidity decreased at the end of the year to CHF 2.2 billion (previous year: CHF 3.5 billion), the pensions payouts were always secured. The return on these liquid assets was slightly negative, but in contrast to the previous year, there was no need to resort to the sale of fixed assets.

Strong economic recovery

These broadly positive results were achieved against the backdrop of a strong domestic and international economic upturn, in response to the pandemic-related setbacks. However, accelerating inflation in the US and the EU is a cause for concern. Added to this are a pronounced rise in raw material prices and increasing supply bottlenecks for various important raw materials. The risk of a global recession has thus increased.

The situation in Switzerland remained unchanged, with a strong franc and negative interest rates.

At the same time, the influence of governments on the global economy is increasing, both in terms of public spending – the pandemic has led to a huge growth in public debt worldwide – and in terms of regulation and taxation. Central banks continue to keep interest rates low, which increases the risk of a bubble in the real estate sector.

China, the global growth engine, again faced heightened uncertainties due to the resurgence of the COVID-19 pandemic. In particular, this had an effect on government bond interest rates, which were driven down at the end of the year. 

Revision of the AHV

Following the popular vote in May 2019 on the RFFA project, the AHV has been granted around CHF 2 billion in additional funding per year since 2020. Despite these measures and the positive investment results, the financing of the AHV and IV is not secure in the medium term. Due in part to demographic trends, the gap between revenues and expenditures is widening year after year. 

Responsible investments

In the year under review, compenswiss again placed great emphasis on the further development of responsible investments in the areas of environmental, social and corporate governance (ESG). compenswiss is a founding member of the Swiss Association for Responsible Investment (SVVK-ASIR). Within this framework, compenswiss follows a four-fold sustainability approach: ESG integration, exercise of voting rights, shareholder dialogue and normative exclusions.

In May 2021, the Board of Directors approved a concept for a sustainability benchmark for its investments in terms of ESG performance, climate change and sustainable impact. Companies active in mining and power generation that derive more than 50% of their turnover from coal were excluded from the compenswiss investment universe in 2021. This threshold was even reduced to 30% in May 2021. More specifically, this led to the exclusion of 56 companies and divestments amounting to CHF 50 million.

New investment process

The Board of Directors approved the new investment process at a workshop in May 2021. The new process is designed to increase transparency and provide a detailed understanding of the individual components. The solution developed includes a number of technical aspects with the aim of meeting the different requirements of the social security fund’s assets. This process, which is essentially planned for 2022, consists of seven phases in which the Executive Committee builds up the allocation gradually through proposals to the Board of Directors and processes it with the use of interactive tools. A new form of reporting to the Board of Directors has been introduced for this purpose.

 

Photo: Patric Pop

Board of Directors

From left to right: Bruno Parnisari, Gabriela Lenherr, Karl Stefan Mäder, Beat Schwaller, Sandra Gisin, Ruth Meier, Manuel Leuthold, Roland Müller, Michaela Troyanov, Bénédicte Montant, Daniel Lampart. Absent: Henrique Schneider, Urs Eggenberger

Changes and thanks

There were no changes to the Board of Directors in the year under review.

In the Management Office, Mr Marc Pfenninger, Head of Operations & Finance, was elected Deputy Director on 1 February. Mr Frank Juliano, previsously Head of Asset Management, assumed responsibility for the Investment Solutions Department as of 1 February. As of 1 April, Ms Gaëlle Barlet was appointed Head of Asset Management and member of the Executive Committee.

The asset business has been reorganised. As of 1 February, all departments that directly manage part of the assets internally have been merged into a single Asset Management department.

The number of employees remained constant in 2021, with 57 people or 54 full-time equivalents.

We would like to thank the Board of Directors and all employees for their great commitment and flexibility in a challenging 2021. The constant switch between office and home office was neither easy nor straightforward, but it was mastered perfectly.

 

Photo: Patric Pop

Executive Committee

From left to right: Eric Breval, Gaëlle Barlet, Frank Juliano, Vivien Ravel, Francesca Azzi Price, Marc Pfenninger

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