Collective Foundations – a Model for Success?

The business model of the Alvoso Pension Fund differs from a lot of other collective foundations in terms of organisation. Pension assets are invested for, and in the interest of, beneficiaries, since no shareholder value needs to be created.

The majority of BVG-insured persons in Switzerland are insured with a collective or joint foundation. Many of these larger entities offer their services directly, although mainly indirectly, to insured companies, at multiple levels. In addition to their principal activity of managing policyholder data, general asset management, property development and/or management services are often also offered under the umbrella of a holding organisation. Other fields of activity consist of fiduciary services and administrative activities, which are carried out by a third-party company that is also subordinated to the holding company. By means of these offers, corresponding fees flow to the owners of these companies in the form of direct and, mainly, indirect costs. These owners can be individuals or larger, listed companies that generate fees for the benefit of their shareholders, i.e. the owners of their shares. The stock market prices of many insurance companies demonstrate the fact that these models work well for shareholders. This situation can lead to conflicts of interest, however.

The Alvoso Pension Fund operates in accordance with a different business model. The “shareholders” of the Alvoso Pension Fund are the Fund’s individual insured persons. They elect the Foundation Board periodically from among affiliated companies. Thus, Foundation Board members have a vested interest in making the Fund’s organisation both effective and cost-efficient. This is because every additional administrative franc is deducted from financial performance achieved and thus also, from the interest returned on pension assets.

In 2019, the Alvoso Pension Fund made considerable efforts to streamline its organisation and to reduce (hidden) fees. The Foundation Board arranged for an independent consultant to put all services (policyholder administration, asset management, fiduciary services, etc.) out to tender. In order to avoid any conflicts of interest, the tender was carried out on a fee basis as regards the consultant (and not via reimbursement to the consultant from the companies selected). There is never any participation in service providers of the Alvoso Pension Fund by the Fund’s own Foundation Board members.

The Fund’s organisation is completed by the election of an independent investment controller. His/her task is to audit the work of asset managers on an annual basis and, in addition to compliance with the agreed investment activity, to investigate their work for potential (hidden) fee traps. Thanks to its organisation, as a non-profit organisation, the Alvoso Pension Fund is entirely at the service of your insured persons and their companies.