Determination of investment strategy, asset liability management study

The aim of an asset liability management (ALM) study is to determine an investment strategy that is optimally tailored to the investor’s risk capacity and tolerance.

Results

Analysis of liabilities and calculation of return targets

The return targets are derived from the specific structure of the liabilities, adopting both technical and market valuation approaches. Account is taken of the consequences of the specific investment horizon, liquidity requirements, available reserves and an appraisal of the ability to reorganize the portfolio.

Analysis of investment opportunities and determination of efficient investment strategies

The risks and returns expected in the medium and long term are calculated for each investment category. Using optimization models and simulations, proposed strategies are devised corresponding to the required return targets.

Analysis of efficient investment strategies

The opportunities and risks of the strategies are visualized using various key management figures. Development of the average expected liquidity ratio, possible fluctuation bands of the liquidity ratio, probabilities with which certain critical liquidity ratios will be undershot, reorganization costs as a percentage of wages and reorganization period, etc.

Recommendations on choice of investment strategy and amount of fluctuation reserves

Based on the key management figures calculated, ECOFIN makes a recommendation on the choice of investment strategy and the amount of fluctuation reserves in accordance with Swiss GAAP FER 26 and provides a technical justification for any departures from BVV2, the Swiss pension fund law.