Profond in times of turbulent investment markets
Yesterday the world’s most secure bank – today, history. Banks and financial service providers are increasingly running into difficulties. As they get sucked under, bonds are lost that have adorned portfolios with their excellent ratings, despite their low coupon, likewise capital protected products acquired by the floundering institutions. This is reason enough to take a closer look at the security of one’s own portfolio.
Profond (an independent Swiss pension fund) applies an active, traceable and disciplined approach, investing in sound markets and companies with the aim of achieving attractive long-term returns of between 6 and 8 percent.
We avoid structured instruments and products, thus substantially reducing secondary risks. Our maxim, which forbids risky leverages and short selling, is not undermined by taking positions in strategies such as hedge funds.
Profond currently has a diversified portfolio of healthy, successful companies and issuers. The portfolio is convincingly simple, can be rapidly liquidated and contains no structured products or hedge funds.
Through our investment strategy, we tap sustainable value potential in the following asset classes: shares, private equity, interest rates, real estate and alternative investments. Shortterm fluctuations are consciously accepted, and are offset with sufficient fluctuation reserves. Assets that show little promise of retaining their value are phased out of the portfolio.
- In the area of interest rate products, Profond focuses on managing interest rate and yield curve risks, and largely avoids liquidity, refinancing, credit and correlation risks.
- In the share sector, our analysis focuses on quality. If companies do not consistently follow their corporate objectives, and instead gear incentives towards short-term optimization of their own interests, Profond does not shy from backing down from a commitment, even if the company has a key weighting on the index. For this reason, our portfolio practically contains no more bank securities.
- Our investment specialists have an excellent network and extensive experience in the area of bonds. They focus on attractive real interest rates. Bonds are currently underweighted in the portfolio.
- In terms of real estate, we have expanded our portfolio through promising direct investments and projects in Switzerland. Internationally, we are involved in indirect investments.
Since its inception, Profond has generated an annual return of 6.9% using the investment approach described above. This is sufficient for a medium interest rate of 5% and a 1% annual increase in current pensions. The additional income has been used to increase policy reserves in order to safeguard current pensions in view of increasing life expectancy and to finance the unchanged, attractive conversion rate of 7.2%.
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