3rd pillar investment solution from VIAC

Banks, Insurances & Third Pillar
101

I think I lost you somewhere in my explantions. Sorry. I just came up with an example of a company which has a huge difference between it’s risk currency and trading currency. We do just offer ETF and Indexfonds. Stockpicking is not possible / allowed.

This example had nothing to do with our product - was just a general example what to consider when you want to hedge a currency for a stock.

1 Like
102

Sorry, I’m just confused as to what the 40% limit refers to. So it refers to the fund currency? So we need 40% of ETFs in our portfolio, where the currency is CHF or CHF hedged?

103

So do I have this correct: If you were to offer VWRL it would only count as ~2.6% out of the required total 40% swiss allocation? I would still need to cover 37.4% with additional swiss investments?

On another note will you offer Swiss Mid funds? e.g. SMIM index or SPI Mid cap?

104

@VIAC You do a good job and many have waited for your offer.

I would like to keep the Swiss part of my share allocation in a (your) 3a-account, as

  • Swiss blue chip dividends are with roughly 3% on the higher end
  • I thus reduce my tax load on them
  • and by investing in Swiss shares, I am also avoiding the 1-1.5% currency exchange fee of your bank.

My questions:

a) Your AUM grew, so I guess the currency exchanges could be compensated internally only in a limited way? What were the numbers for the 100% world equity fund roughly in the last months?

b) What limits will I have with Swiss blue chips? 35% per fund only? What about combining SMI and SLI?

c) Everybody seems to be convinced that rebalancing must be great. I have seen no study proving this. It could go either way, especially if it’s done often and if it carries fees (currencies). Could we please opt out of it when there are not regulatory constraints?

2 Likes
105

I think you should be OK with SPI Extra:

check the graphic here:

SPI Extra offered even better long-term return than SMIM (in the past)

1 Like
106

Oh wow I completely missed the SPI extra. Must be because I cant buy it as a retail investor. :thinking:

What’s everyone elses strategy for the 40% CH part?

107

Did I get it right, that SPI Extra = SPI - SMI? If so, I don’t see what’s the big deal. I guess I would put all 40% in SPI. It’s like 10 times the real size of the Swiss market, but these companies are anyway generating most of their income abroad.

108

You can. But not everywhere. Viac sells it to you. So does Swissquote. They were made for pension funds and the like, but CS started selling these to individual investors. There are several versions of their securities. In the case of SPI Extra it’s the one ending in FA which is sold to individual investors.
https://www.six-swiss-exchange.com/funds/security_info_de.html?id=CH0222624659CHF4

I actually asked IB a few weeks back why they don’t sell it. They told me to check if they can sell it and asked me to try again soon. Dunno if this isn’t just a friendly way to syy no.

109

Hi VIAC,

Thank you very much for your availability on this forum and the great solution you offer. I am looking forward to design my own portfolio! :smiley:

I will monitor closely your offering with regard to the 2nd Pillar. It could be very interesting for people managing a small company or for self-employed people wanting to optimize their taxes :slight_smile:

Keep up the great work!

3 Likes
110

I agree with this. I do not want to sell foreign currency assets in one month just to rebuy them the next month and lose money in the process because of currency fees. The rebalancing right now is to aggressive for my taste, it should only happen if the difference from the target is huge. Having re-balancing on demand only would be great.

111

congrats VIAC to your feature on NZZ:

2 Likes
112

Re-found this pretty exhaustive treatment of the rebalancing question.

http://www.mindfullyinvesting.com/articles/8-investing-over-time/8-7-rebalancing/

Conclusions

We’ve discovered that:

  • Standard investing advice assumes that rebalancing is productive.
  • However, rebalancing versus pure buy-and-hold are mirror image market timing decisions. One is not inherently better than the other.
  • It’s mindful to consider that rebalancing may be both “good” and “bad”, or effective only under specific circumstances.
  • The effects of rebalancing vary over different periods and with different portfolios; rebalancing effectiveness is circumstantial.
  • There is often no “bonus” (increased returns) for rebalancing portfolios of stocks and bonds, particularly when investing over many years. And risk-adjusted improvements are also usually small.
  • There is a rebalancing bonus for stock-only portfolios, but it’s most prominent for portfolios of relatively uncorrelated stock components that are concentrated in highly volatile areas. And the bonus may disappear in any given period as correlations change over time.
  • It appears impossible to create a generally applicable cost-benefit analysis for various rebalancing methods and scenarios.
  • No one type of rebalancing method appears superior from a return/risk perspective.
  • Any rebalancing method being considered should be closely evaluated to minimize transaction costs specific to that situation and investor type.
  • Use of income and ongoing contributions for rebalancing is a key cost minimization technique.
  • Minimizing the number of transaction and taxable events will help maximize the rebalancing bonus you may (or may not) eventually realize.

Mindful contemplation has revealed the answer to the rebalancing paradox. While buy-and-hold and rebalancing are both technically a form of market timing, rebalancing often adds additional costs, only yields tangible benefits for select types of portfolios, and may fail to produce the sought-after bonus in any given investing period. Rebalancing sounds like a paradox, but in reality, the main issue is that the benefits are confined to a narrow set of circumstances

1 Like
113

I would also prefer to skip the automatic monthly rebalance, just invest the money as designated.

@VIAC would it be possible to let users decide when they rebalance? Also do you have an estimate on what the costs are for you when rebalancing monthly vs annually or bi-annually?

114

@VIAC Congrats on the endorsing fintool video: https://www.fuw.ch/article/vollgeld-2-copy/

2 Likes
115

A question to VIAC: are you planning to offer any multifactor ETFs? The TER of 0.53 % that you have matches that of these actively managed funds. Otherwise it’s still too expensive.

Another thing: did you think of lowering the cost by loaning the stocks to other traders or is it not allowed by the law? I read that this way we may soon see ETFs with zero or even negative TER.

116

Yes. That would be the case. But we offer the MSCI World ex CH, so it counts 100% into the foreign currency allocation. For the 40% CHF you have to choose either CHF Assets or CHF hedged foreign assets.

We offer the following CHF assets for a classic portfolio construction:

Bonds:
CSIF CH Bonds AAA-AA max. 97%
CSIF CH Bonds Corporate max. 97%

Equities:
CSIF SMI max. 20% (combination possible)
CSIF SPI Extra max. 35% (combination possible)
UBS ETF SLI max. 35% (combination possible)

Real Estate:
CSIF CH Real Estate max. 30%

Once the release is public you will find all the details :wink:

3 Likes
117

See the answer before for the question b)

Regarding your question a)
Yes, that is true. As we grew every month, there is only a limited netting effect. The FX-Spread was around 0.80% in the last months. But as this is a one off fee (if you are a buy and hold investor) and can now be fully avoided with the individual strategy, I think this is “ok” - thinking of our closest competitor who charges at least 1.5% as far as I know… Not to speak of the higher cost in the ETF/Funds and All-in fee. But there is always room for further optimizations… And I’m looking forward to the first month with close to 100% netting :slight_smile:

c) Not at the moment. It’s also a regulatory issue, as we wouldn’t controll the risks of your investments any more. We think of a solution for the next release in fall. Maybe that you can set your inidivdual threshold. But then think of your monthly contricution who would no be invested that fast anymore…

1 Like
118

And do you offer simply an SPI fund? Like iShares SPI or UBS SPI? Why mix SMI & SPI Extra, when you can just have the SPI.

1 Like
119

For the Moment our set of ETFs and Indexfunds remains “old fashioned” :wink:

Securities Lending could be done, but for the time beeing it’s not an option.

And after all at some point we have to make money :slight_smile: the system we developed in Switzerland (!)was not that cheap and I like a paycheck as well be the end of the month. But with our release 2 reward program you can lower your fees if you invite friends, not much but still as we are already the cheapest offer in the market.

7 Likes
120

They are both 0% TER Funds (made for institutional investors like a pension fund). So why pay 0.10% (iShares) if you can get them at zero cost? :slight_smile:

3 Likes