Especially during stock market slumps:

Advantages with dynamic risk management

Tellco’s investment strategy focuses on long-term growth

With its investment strategy and dynamic risk management, Tellco pk aims for balance; the best possible return is to be achieved with the greatest possible security. This combination does not mean maximum profit, but in difficult phases it does not mean big losses either. Especially in economically challenging times, this is very important to many clients.

What is dynamic risk management?

The maximum acceptable risk of the investment strategy is periodically assessed, the market environment is systematically evaluated at regular intervals and a cost-efficient management of the equity quota is pursued. Compared to a static risk management, the share quota can vary more strongly.

Significance for the insured

With dynamic risk management, the risk of underfunding decreases, the return is better in the event of strong and prolonged bear markets and the pension fund remains capable of acting for longer. It can also be said that the insured can sleep more peacefully.

A changing market environment calls for dynamic risk management

The market environment has changed and the requirements for the risk-oriented management and supervision of pension funds have grown. To be successful in this, a professional organisation as well as long-term and performance-oriented instruments are required. The focus is on managing the equity portion of the invested assets, as this makes the largest contribution to risk.

The performance chart clearly shows how the investment strategy behaves during stock market fluctuations. The example shows the comparison to a pension fund with a more aggressive, static investment strategy. To make the data comparable, we had to align the data with our technical interest.

Performance

Less fluctuation in the coverage ratio thanks to long-term focus

It can be seen that after 2021, a very good stock market year, the coverage ratio of the comparison fund was around 5 percentage points higher than that of Tellco pk. If the markets are at a low, the difference is even greater, but with different signs: In 2011, the comparative coverage ratio is 12.5 percentage points lower than that of Tellco pk. The long-term view shows that in strong economic times Tellco pk does not gain quite as much as the biggest winners, but in bad stock market times it incurs fewer losses.

Coverage ratio

Our conclusion

Depending on the market environment, this does not necessarily result in a better return or coverage ratio in the long term compared to static risk management; however, overall and especially in the current period, the advantages clearly outweigh the disadvantages:
Especially in turbulent times, they have the certainty that the fluctuation margin in their investments is kept within limits.

News

OPA minimum interest rate remains yet again at 1 per cent

OPA minimum interest rate remains at 1 per cent: The Federal Council was informed at its meeting on 12 October 2022 that a review of the OPA minimum interest rate would be waived this year. As early as August 2022, the Federal Commission for Occupational Benefits Provision also came out in favour of maintaining the rate at 1 per cent.

The Federal Social Insurance Office informs in a release dated Wednesday, 12 October 2022, that despite the current difficult situation on the markets, maintaining the minimum interest rate of 1 per cent is justified.

The reasons for this decision included the following:

  • The return on government bonds has increased significantly
  • Equities and real estate showed a positive performance in 2021, but there were significant setbacks in the current year

The OPA minimum interest rate determines the minimum interest rate to be applied to the pension assets of the insured person in the mandatory OPA. The Federal Council must review the level of the minimum interest rate at least every two years and will therefore carry out the review in 2023.

The most important summarized
  • The OPA minimum interest rate remains unchanged
  • Interest rate remains at 1 per cent in 2023
Information on the subject
Our current Tellco pk key figures Tellco pk prospectus Press release of the Federal Council (in German)

Read more about the following topics:

Pension fund Occupational pension
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