INVESTMENT STRATEGY & ASSET POOLING

Introduction


The fewer the assets, the more it costs to manage them. Smaller foundations spend an above-average proportion of their assets on asset management. If smaller foundations pool their assets with larger bodies, the resultant volume discount will ensure that a substantial part of costs – i. e. the actual investment and switching costs – are kept lower, thus benefiting all participants. This will leave foundations more resources for their core task: project support. However, other costs – such as determining investment strategy and monitoring investment results – will still be relatively high for smaller foundations.

The pooling solution adopted by Gebert Rüf Stiftung is based on an integrated solution («value-added chain») that involves a number of partners. Persons with responsibility for the finances of foundations are invited to contact the management of Gebert Rüf Stiftung to discuss the options and scope of asset pooling in general. Gebert Rüf Stiftung does not act as a financial services provider itself but as a grant-making foundation committed to maximizing non-profit foundation work within the area of its activity «Stiftung Schweiz».

Avoidance of conflicts of interest


Gebert Rüf Stiftung’s investments are organised in such a way that responsibilities for the individual parts of the value added process and chain are readily transparent. Strict divisions between the different companies responsible ensure the essential checks and balances. Conflicts of interest are also ruled out as far as possible by preventing inducements across all stages of the process. For instance, the flat rate contractually agreed under the pooling arrangement means that during the investment process self-interests cannot be served when selecting the – nota bene almost exclusively passive – products.
The board of trustees is responsible for assessing the investment performance. On the basis of the investment result (comparative observation), the board decides if and when a fully external review of investment form and organisation is to be conducted.

Principles and Investment Strategy


  • Risk minimization through diversification
  • Optimization of asset structure, taking due account of the grant-making objectives of Gebert Rüf Stiftung
  • Safeguarding the market return by using indexed investments
  • Avoidance of investment risks which cannot be recouped (e. g. currency risks)
  • Low-cost implementation through indexed investments
  • Maximum tax efficiency in terms of Swiss and foreign taxes on interest and dividends, with full exploitation of refund opportunities
  • Low-cost asset management: optimization of the relationship between asset management costs and earnings/performance

Parameters


  • Fund outflows constant: approx. total CHF 10 million p. a.; capital preservation is not a principle
  • Long-term rate of return: 4 % p. a.

Asset Allocation


  • 30 % CHF bonds, 30 % bonds in foreign currency (hedged in CHF), 40 % global stocks, of which about two-thirds are exchange-rate hedged or direct in CHF. Exchange-rate hedging part of the assets reduces investment risk without appreciably lowering the expected return.
  • This asset allocation mirrors the reference portfolio or benchmark.
  • The return on the portfolio held by Gebert Rüf Stiftung is measured against the benchmark, with the difference indicated as surplus return. This can be positive or negative.
  • Benchmark from 31 July 2015 :
    ° Swiss Bond Index (30 %)
    ° Citigroup WGBI ex Schweiz hedged in CHF (15 %), Barclays Global Aggregate Corporate Bonds ex Schweiz hedged in CHF (15 %)
    ° MSCI World ex CH hedged in CHF (11 %), MSCI World ex CH (5 %), MSCI Emerging Markets (8 %), SPI (9 %), MSCI Emerging Markets Eastern Europe ex Russia Food, Beverages & Tobacco (7%).
  • Benchmark from 15 April 2014 to 30 July 2015:
    ° Swiss Bond Index (30 %)
    ° Citigroup WGBI ex Schweiz hedged in CHF (15 %), Barclays Global Aggregate Corporate Bonds ex Schweiz hedged in CHF (15 %)
    ° MSCI World ex CH hedged in CHF (18 %), MSCI World ex CH (5 %), MSCI Emerging Markets (8 %), SPI (9 %).
  • Benchmark from 24 May 2013 to 15 April 2014:
    ° Swiss Bond Index (30 %)
    ° Citigroup WGBI ex Schweiz hedged in CHF (20 %), Barclays Global Aggregate Corporate Bonds ex Schweiz hedged in CHF (10 %)
    ° MSCI World ex CH hedged in CHF (18.5 %), MSCI World ex CH (10.5 %), MSCI Emerging Markets (8 %), SPI (3 %).
  • Benchmark from 14 January 2010 to 24 May 2013:
    ° Swiss Bond Index (30 %)
    ° Citigroup WGBI ex Schweiz hedged in CHF (30 %)
    ° MSCI World ex CH (19 %), MSCI World ex CH hedged in CHF (19 %), SPI Large & Mid Cap Index (2 %).

Implementation with FINPOOL


Investment policy is now implemented with the FINPOOL pooling solution arranged by a strategic partner together with banks and asset managers. In principle, the solution can be applied to any investment strategy. In this way, each grant-making foundation can determine its investment strategy individually (or have it determined).

FINPOOL has the following features:
  • Indexed (passive) investments that have the characteristics listed below and are reserved for institutional investors:
    ° Index tracked by replication or «stratified sampling» (partial replication); no unwanted counterparty risk and no risk of performance deviating substantially from benchmark.
    ° On transition (first-time investment), existing securities holdings can be incorporated
    ° These tranches of large-scale, collectively managed funds enable costs to be kept low.
    ° Low-risk procedure for securities lending
    ° An exception is the global corporate bond investment category (hedged in CHF): active, index-based
  • Investments in foreign stocks are available as tranches with 50 % exemption from US withholding tax. This results in an additional return of approx. 0.15 % or 15 basis points for grant-making foundations where the majority of beneficiaries are domiciled in Switzerland.
  • Investments in foreign stocks are available as currency-hedged tranches.
  • Safekeeping account at custodian bank does not incur any fees.
  • Transparent fees:
    ° For transactions in funds on the SIP platform of Swiss & Global Asset Management Ltd., Gebert Rüf Stiftung pays the fees agreed with the strategic partner. These fees include charges levied by third parties (fund management, custodian bank etc.). For all other funds the strategic partner receives a fixed fee, and only third-party charges are debited directly to the funds.
    ° Any payments from third parties remunerated to the strategic partner (e.g. retroceded commissions) will be credited/repaid in full to the client.
    ° Very few costs are charged to the funds, and these are detailed in the fund regulations; thus impairment of performance is minimal (reduction by approximately 1 basis point p. a.).
  • There is an option for arranging fully independent investment controlling with a third party.