ABB Finds Benefits in Outsourcing
ABB Vorsorge, the Swiss-based pension fund manager, is getting closer to its goal of managing cost-free and, ultimately, contribution-free pension schemes for its sponsor.
Chief executive Christoph Schenk says: "We have reduced the cost of managing ABB's scheme by 20% since 1998, when we set up a structure to run pension funds for other Swiss companies for fees.
"Our three-year performance, on a risk-adjusted basis, is now number one in Switzerland, and we hope to win more mandates in due course."
ABB is the European electrical engineering company more traditionally known as Asea Brown Boveri. Its Swiss pension fund, called ABB Anlagestiftung, currently represents 75% of ABB Vorsorge's SFr6bn (E4bn) portfolio.
Schenk, who has an MBA from the University of Bern, used to develop funds for Credit Suisse. He started off as head of training for one of its retail fund arms in 1993 and moved to Credit Suisse Asset Management to become bond and structured product manager in 1995.
Schenk was recruited to manage ABB's six German-speaking Swiss pension schemes in 1997. He went on to discuss the future of the schemes at great length with individual trustees and representatives from their sponsor.
"Three of us decided almost at the same time that we could cut down costs by taking on third-party funds," says Schenk.
He points out that several companies and public bodies in Switzerland decided to set up funded pension scheme arrangements in the late 1990s. Rather than undergoing the cost of setting up their own scheme, and appointing their own managers, some of them have decided that ABB Vorsorge can provide them with a safe pair of hands.
Traditional providers, such as insurance companies and banks, have not always covered themselves with glory in Switzerland. "We are fully conversant with the Swiss tax system and local customs," says Schenk. ABB Vorsorge has now secured 13 German-speaking Swiss clients for both specialist and general work. It was also one of the first Swiss funds to offer a defined contribution plan to its senior executives. Clients include Alstom's and Bombardier's Swiss schemes.
Dutch-based Philips Electronics is another commercial firm taking on outsourced pension fund work through its Schootse Poort offshoot. Siemens of Germany more recently made the decision to seek external funds. …