Report Pins Swiss Pension’s Shortfall on Manager ‘Misconduct’

BVK, Switzerland’s largest pension fund, suffered losses due to unsound investment practices, a parliamentary investigation has found.

(October 2, 2012) — BVK, Switzerland’s CHF 20.6 billion ($22 billion) public pension, has been systematically mismanaged by its current and former finance directors, according to a parliamentary investigating committee’s report. 

The committee found that the annual and long-term investment strategies pursued by BVK lacked a solid basis, according to public news outlet Swissinfo’s summary of the report, which was published only in German. The current and three former finance directors did not have sufficient expertise to make asset management decisions, and failed to put together an investment committee capable of supporting in strategic planning, investigators found. Poor investment decisions and overly high fees paid to external managers cost the fund an estimated several hundred million to CHF 1.5 billion ($1.6 billion). 

BVK’s managers lost 0.7% of the fund’s assets in the fiscal year 2011, and posted gains of 2.2% in 2010. 

The committee’s report contradicts Zurich’s public prosecutor, who blamed a recent corruption scandal on the former head of asset management’s “exceptionally influential position,” rather than lack of oversight. 

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Daniel Gloor was charged with embezzlement, bribe-taking, breach of confidentiality, and money laundering in 2011, and confessed to taking bribes worth $1.28 million while at BVK. He said the money did not influence his investment decisions. A verdict on Gloor’s trial is expected at the end of November. 

In a statement on its website, BVK pinned its shortfall on the “legally permissible” investment decisions made in the past, “some of which [are apparent as mistakes] from today’s perspective,” and the “dramatic declines in the financial markets.” The statement acknowledges “deficiencies” in its former investment strategies, but highlights “numerous measures [have been] corrected,” including broader support for asset managers, the establishment of an investment committee, increased involvement of external experts, and consistent screening of all external contracts.

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