Mr. Schaffner, how did you become a fund manager?
Marc Schaffner: I followed a traditional career path: I graduated in economics at the University of Zurich before going on to study financial economics in greater depth at AZEK, the Swiss Training Center for Investment Professionals. In 2001 I joined UBS Asset Management, where I share responsibility for the UBS Vitainvest investment funds. The Asset Allocation team is responsible for the tactical investment decisions; the Implementation team carries out those decisions and takes care of the funds’ inflows and outflows. Then there’s the Risk Management team to ensure the funds are not exposed to more risks than intended.
The Vitainvest funds rely on a multimanager concept. What difference does this make?
The multimanager approach means that we work with a number of different fund managers, who are selected on the basis of very strict, sustainable criteria. This gives investors access to the top specialists – without it costing more. It allows us to diversify not just across asset classes and investment securities, but also by blending managers and their investment styles – all of which has been shown to enhance the risk-return profile of our funds. We use the multimanager concept for our four main asset classes: Swiss equities, Swiss bonds, global equities and global bonds. The concept has clearly paid off over the last three years; in 2013 all four main asset classes notably generated substantial added value.
What distinguishes the Vitainvest funds from rival products?
First, we have a great amount of experience between us. Our department has been around for a good 30 years now – and the 100 or so employees have an average of 15 years’ experience. We have a global reach, with operations in eight financial centers worldwide. Time-tested processes implemented with discipline ensure that we work together efficiently. Second, we’ve developed an effective risk management system. We monitor our risks continually, right down to the level of the individual securities. On top of which, we are able to simulate scenarios. This means we always know, for example, how an escalation of the Crimean crisis would affect our portfolios. Third, we are the only provider to use the multimanager approach in relation to retirement planning and pension provision.
How much leeway do you have in terms of asset classes?
Like all pillar 3a retirement funds, the Vitainvest investment funds are subject to the Swiss Occupational Pensions Act (BVG). Among other things, this specifies that a maximum of 50 percent can be invested in equities, 15 percent in alternative investments and 30 percent in foreign currencies. What’s more, we have put even stricter rules in place internally, especially in relation to equities, with the aim of further restricting the risks. The Vitainvest World funds offer a choice of four risk profiles. The portfolio manager has to stick to the bandwidths set for each asset class. However, the active weightings are allowed to deviate by up to five percent in either direction within these bandwidths. Overall, that makes up leeway of 10 percent, enabling the portfolio manager, for example, to overweight equities by five percent compared with the benchmark when opportunities look attractive.
What lessons have you learned from the financial crisis?
We now work in a more structured and disciplined manner than before the financial crisis. It’s important that we stick to a defined investment process, especially during a crisis. Why? The financial crisis clearly demonstrated that investments can deviate from their “fair” value for a very long time and that acting emotionally on impulse can lead to disastrous results in the long term. In addition to which, we saw how important the liquidity of investments is. As our Vitainvest funds can be sold at any time, we also have to invest in liquid assets. Should new crises come to a head, we will naturally restructure the portfolio as defensively as possible within our investment guidelines.