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Long-term view, dynamic implementation

Tellco pkPRO is a semi-autonomous collective foundation. The risks of disability and death have been reinsured with an insurance company. The retirement capital is managed dynamically but conservatively, and our portfolio contains a relatively high equity component (18% to 25%). This allows us to earn a higher yield in the long term, even when markets are very volatile. The process of investing the pension capital is a closed system: the employee benefits assets and income earned on these assets remain with the foundation and benefit only the insured.

Generally speaking, a funding deficiency can occur, but if the funding ratio falls below 90%, rehabilitation measures are immediately instigated. To avoid a funding deficiency in the long term, surpluses are used, among others, to raise a value fluctuation reserve.

In contrast to the so-called capital guarantee granted by life insurance companies – which only covers a certain percentage of an investment, subject to the requirement that 10% of the investment income be passed on to the insurance – the investment model applied by the collective foundation Tellco pkPRO has the potential to earn a bigger return with lower costs and administrative expenses.
 

Interest

The board of trustees of Tellco pkPRO fixes the interest rate for the current year in December, basing its decision on the forecast for the annual result as well as the following principles: If the foundation’s funding ratio is expected to be more than 97.5%, the retirement assets earn interest at the BVG minimum interest rate determined by the Federal Council. If the funding ratio is between 90% and 97.5%, the board of trustees will decide to apply a lower interest rate or even a zero interest rate. If the funding ratio is less than 90%, rehabilitation measures are implemented immediately.
 

Interest Rate Restructuring Graph
 

Surplus model

Surpluses are used to raise reserves to cushion fluctuations on the markets and are also paid out to the insured during the surplus distribution process. According to the regulations of Tellco pkPRO, from a funding ratio of 105% the foundation’s excess income is divided equally between the value fluctuation reserves of the affiliated pension funds (weighted) and the value fluctuation reserve of the foundation. From a funding ratio of 112.5%, the net profit is credited in full to the uncommitted funds of the pension funds, who can use these funds as they choose for their insured.
 

Surplus Model Graph
 

Termination of contract

If an affiliation contract is terminated and the funding ratio of the pension fund is less than 97.5%, the vested benefits are reduced by the amount of the funding deficiency (imputation principle). The mandatory retirement assets, however, may not be reduced. The available value fluctuation reserve or uncommitted funds of the pension fund are used to reduce or eliminate the deficiency. If the funding ratio is between 97.5% and 102.5%, the pension fund is entitled to the uncommitted funds. From a funding ratio of more than 105%, the foundation’s value fluctuation reserve and uncommitted funds are added to the vested benefits on a pro rata basis.
 

Graph Termination of Contract Graph
 

Investments

An employee benefits scheme needs a long-term investment strategy that complies with the provisions of the Ordinance on Occupational Retirement, Survivors’ and Disability Pension Plans (BVV2). Due diligence obligations, security and diversification take centre stage. An important objective is to generate an appropriate and long-term return that is as stable as possible for the beneficiaries so that all pension and payment obligations can be met at all times.

It is the responsibility of the board of trustees to determine the investment strategy and bandwidths for the different asset classes. The investment strategy of pension fund pro is conservative. It is reviewed annually by the board of trustees and the investment committee with the help of an asset and liability model (ALM). For tactical decisions, the board of trustees dictates the bandwidths per asset class to the investment committee.

The investment strategy of Tellco pkPROtracks the BVG-25 Index 2000 of Bank Pictet & Cie, Geneva. It is just as conservative as the strategy of the index, which excludes both dramatic gains and excessive losses. The long-term objective is to exceed the BVG-25 Index 2000 with a comparable exposure to risk. Currently, Tellco pkPRO retains the freedom to deviate from the BVG-25 Index 2000 with its relatively strong focus on bonds and apply a balanced portfolio approach in order to sustainably increase its yields.
 

Asset classes Bandwidths Strategy Benchmark*
  Min. Max.    
Money market 0% 10% 5% 0%
CH bonds 0% 40% 10% 60%
Global bonds 0% 20% 5% 15%
Convertible bonds 0% 8% 5% 0%
Loans and mortgages 0% 10% 0% 0%
CH equities 0% 20% 11% 10%
Global equities 0% 20% 11% 15%
CH real estate 20% 35% 33% 0%
Alternative investments 0% 30% 20% 0%
Money market
Bandwidths Min. 0%
* Pictet BVG-25 Index 2000
 

The latest key figures, including return and funding ratio, are available here:
 

Monthly performance / funding ratio

 

Year 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
Jan 0.2 0.24 -0.87 -2.18 -0.02 1.60 1.11 1.27 0.15 -0.49 -2.06
Feb -0.73 1.17 -0.89 2.54 0.94 0.77 0.94 0.51 0.93 -2.25 -0.70
Mar -0.08 0.64 0.63 0.42 0.44 1.07 0.43 -0.46 0.77 1.46 -1.90
Apr 1.11 0.81 0.54 0.14 0.50 0.91 -0.20 0.03 0.50 3.03 1.28
May -0.35 0.38 0.99 0.14 1.20 0.45 -0.47 -0.42 -0.32 0.67 0.05
Jun 0.16 -0.26 -0.51 -1.27 0.17 -1.89 0.79 -1.14 -2.41 1.16 -2.05
Jul 0.83 1.06 0.92 1.73 0.22 0.92 1.55 -2.85 1.42 2.80 1.08
Aug -0.25 -0.05 0.60 -1.61 1.00 -0.36 0.49 -1.12 -0.90 1.23 1.19
Sep 0.2 0.22 0.15 -0.66 0.35 0.97 0.69 0.65 1.09 0.83 -3.21
Oct   1.06 -0.34 2.07 0.38 1.23 0.08 1.75 1.23 -0.38 -3.62
Nov   0.1 0.30 1.25 1.01 0.36 0.52 0.20 -0.94 0.63 2.43
Dec   -0.02 0.86 -1.13 0.45 -0.06 0.47 1.17 -0.01 0.80 -1.01
YTD 1.1 5.48 2.51 1.31 6.81 6.07 6.57 -0.94 1.44 9.89 -8.49
YTD Bench -0.72 5.19 2.64 0.50 9.45 4.43 7.58 1.61 1.31 11.74 -9.88
FR 102.1 102.32) 101.4 101.7 105.8 102.0 98.01) 95.4 97.2 97.3 91.0
UI_pkPRO_investmentsAndPensionModel_content_p_4a
YTD = performance since 1 January of the calendar year
Bench  = benchmark Pictet BVG 25
FR = funding ratio
1) Reported funding ratio as of December 31st 2012, taking into consideration the reduction of the technical interest rate from 3.5% to 2.5%. If the technical interest rate had not be reduced, the provisional funding ratio would have been above 100%.
2) Reported funding ratio as of December 31st 2017, taking into consideration the reduction of the technical interest rate from 2.25% to 1.75%.

 

Quarterly overview of funding ratio

 

Year FR
31.03.2011 98.1%
30.06.2011 96.4%
30.09.2011 93.0%
31.12.2011 95.4%
Year FR
31.03.2012 97.3%
30.06.2012 97.6%
30.09.2012 99.9%
31.12.2012 98.0%1)
Year FR
31.03.2013 100.9%
30.06.2013 100.0%
30.09.2013 101.1%
31.12.2013 102.0%
Year FR
31.03.2014 102.8%
30.06.2014 104.0%
30.09.2014 105.1%
31.12.2014 105.8%
Year FR
31.03.2015 105.9%
30.06.2015 104.2%
30.09.2015 102.9%
31.12.2015 101.7%
Year FR
31.03.2016 99.8%
30.06.2016 100.3%
30.09.2016 101.4%
31.12.2016 101.4%2)
Year FR
31.03.2017 103.0%
30.06.2017 103.5%
30.09.2017 104.2%
31.12.2017 102.3%3)
Year FR
31.03.2018 101.2%
30.06.2018 101.7%
30.09.2018 102.1%
31.12.2018  
UI_pkPRO_investmentsAndPensionModel_content_p_7a
1)  Reported funding ratio as of December 31st 2012, taking into consideration the reduction of the technical interest rate from 3.5% to 2.5%. If the technical interest rate had not be reduced, the provisional funding ratio would have been above 100%.
2)  Coverage ratio shown as of 31.12.2016, taking into account the reduction in the technical interest rate from 2.5% to 2.25%.
3)  Coverage ratio shown as of 31.12.2017, taking into account the reduction in the technical interest rate from 2.25% to 1.75%.
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Tellco Ltd, Bahnhofstrasse 4
P.O. Box 713, CH-6431 Schwyz
t +41 58 442 12 91, info@tellco.ch
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