Active management – a real advantage, particularly in times of uncertainty

Credit Suisse’s downfall has not just affected private investors – it’s had an impact on anyone in Switzerland who holds a significant portion of their assets in an occupational pension fund. Pension assets are usually passively managed, which can make them less resilient to sharp declines in share prices.


Comments by Vincent Heyberger, institutional portfolio manager and manager of the Piguet Active Prévoyance funds

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Restoring active management to its rightful place

Around 60% of the CHF 1.1 trillion managed by Swiss pension funds is invested in equities and bonds. These institutional assets are often managed passively to simplify matters and keep costs low. But many pension fund managers must now be regretting that choice, which has exposed them to bonds and equities issued by Credit Suisse, such as CoCo and AT1 bonds.

It’s still hard to quantify just how much pension funds stand to lose on these assets. But some experts put the figure at several hundred million Swiss francs. And this is in the wake of a rough year in 2022, when the average performance was –10% (source).

Inflation is riding high and the Swiss National Bank has carried out four rate hikes recently – this kind of instability calls for a rethink of passive management and a return to active management and all that it has to offer. Since inflation set in and monetary policy tightening began, active management strategies have largely outperformed passive management strategies without costing much more.

Passive vs active management

The aim of passive management, which is sometimes also referred to as “lazy investing”, is to deliver the same performance as the broader financial markets. To do this, passive managers replicate a benchmark index – such as the SPI, for Swiss equities – and invest in all the stocks making up that index in line with their respective weightings. The same approach is applied for international equities and for bonds.

Passive management might be simpler and less expensive, but it still poses some risks. Passive managers invest in all the securities making up a benchmark index without going through a selection process or carrying out any due diligence on the companies involved. This is risky because it exposes investors to all the stocks in the index, including those that, under the glare of the media, are heading for collapse thanks to poor governance. What’s more, with a passive approach, investors can’t carefully time when they buy and sell securities – they don’t get to choose the right moment to build up or sell off positions, or to increase or reduce liquidity in order to maximise performance based on price trends.


What’s the best management approach in today’s market?

From the end of the 2008 financial crisis up to late 2021, the disadvantages of passive management were less obvious. During that time, all assets enjoyed abundant market liquidity and were heading upwards, so there was less need for careful stock-picking. At that time, you didn’t need to be an expert to invest in the stock market.

But after years of complacency, investors have had a rude awakening. The investment landscape has been turned upside down by the sharp rise in inflation, renewed geopolitical conflicts and, more recently, the troubles in the banking sector.

The stock market environment has become much demanding. And active managers can offer the agility needed to avoid certain pitfalls in this kind of climate.

On the bond market, for instance, most passive investors had bought long duration bonds to match the benchmarks, while active managers went for shorter duration bonds in response to the sudden rise in interest rates. And that approach paid off – it’s well known that bonds with a short duration tend to outperform when interest rates rise.

And on the stock market, monetary policy normalisation and higher interest rates prompted a shift to banking stocks. But investors in passively managed solutions were, of course, exposed to the entire sector and therefore suffered when Credit Suisse collapsed. Some active managers, however, were more selective in building their portfolios of bank stocks ­– they went for the banks that were dominating the sector and gaining market share, and left out those that, despite being very attractively valued, tended to chalk up huge losses, causing their clients to flee. These managers invested in banks like UBS and Julius Baer and insurance companies such as Zurich and Swiss Re.

So stock-picking has once again become crucial in today’s turbulent times. Blindly buying all the stocks in an index and simply going with the flow is no longer a good option.


Cost differences have narrowed enormously

Back before the 2008 financial crisis, active management was very expensive. But since then, fees have gradually moved closer to those for passive management. The little extra you do pay for active management is probably worth it given the attractive returns on offer.


We offer asset management services for pension funds and actively managed pension solutions for individuals and companies through the following funds:

  • Piguet Active Prévoyance 25 PAP 25
  • Piguet Active Prévoyance 40 PAP 40

Find out more about our funds

Would you like to know more about our investment solutions? Learn about our Q2 2023 investment strategy or contact one of our advisors.



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