Finpension equivalent of VT?

A bit confused as there is no true VT equivalent,
It seems the two closest options would be:
CSIF (CH) III Equity World ex CH Blue - Pension Fund Plus ZB
CSIF (CH) III Equity World ex CH Quality - Pension Fund DB Fonds
Which of these would be the closest to VT?

If you want only one fund, then

Besides Emerging Markets and Switzerland, this would also be missing Small Cap. Last I checked the percentages of AWCI IMI (roughly equivalent to VT) components were:

  • World ex CH: 76.6%
  • World ex CH Small Cap: 10.8%
  • EM: 10.3%
  • Switzerland All Cap: 2.4%

This ignores EM Small Cap, which is not available at finpension. is useful for this.


Then again, there may not be a convincing reason to include them.

  1. 2nd pillar pension funds overweight the Swiss market for many, probably most people.
  2. A 14% allocation is likely not going to make a non considerable difference to overall portfolio performance
  3. …especially if the „missing component“ is highly correlated to the rest of the developed world’s market anyway (see MSCI Switzerland Index)

CSIF (CH) III Equity World ex CH Blue - Pension Fund Plus ZB
Plus, maybe, a few percent of CSIF (CH) Equity Emerging Markets Blue DB

The question is: Do you „need“ to be „closest to VT“? If so, why? And what is the objective you’re trying to achieve by doing so?


How does it differ with the CSIF (CH) III Equity World ex CH Quality - Pension Fund DB? (which is the one I’ve been investing in)

hi @San_Francisco thank you,
Indeed, I don’t need CH exposure as 2nd pillar covers that as you rightly said.

Do I really need to be closest to VT, and what objective I’m trying to achieve?
No, and my objective is 100% equities, maximum diversification and lowest fees possible.

So in that case you would recommend CSIF (CH) III Equity World ex CH Blue - Pension Fund Plus ZB?

I currently have maxed out for my spouse and myself CSIF (CH) III Equity World ex CH Quality - Pension Fund DB Fonds. Should I change the strategy in Finpension? What is the impact of doing so?

Just out of curiosity: Isn’t Small Cap by definition always supposed to be the smallest 15% of market capitalization, e.g. the 14-15% smallest companies of MSCI ACWI IMI? I suppose 1% goes to Micro Cap, therefore 14% and not 15%?

“The MSCI World Small Cap Index captures small cap representation across 23 Developed Markets (DM) countries*. With 4,502 constituents, the index covers approximately 14% of the free float-adjusted market capitalization in each country.”

Same for EM btw, EM Small Cap’s supposed to be 15% of MSCI EM IMI, isn’t it?

Yes, going by the definition, I think ACWI Small Cap should indeed be about 14% of ACWI IMI. However, this is about World (ex CH) Small Cap, which is smaller than ACWI Small Cap. The index constituents are also not reset that frequently, i.e. the percentages can change over time. There are also additional conditions for moving companies between Large/Mid Cap and Small Cap to prevent companies being moved forth and back between the indices.


Yeah I agree on this one, more diversification with EM and Small Caps at no (or hardly any?) additional cost (I personally also add Switzerland just to get the complete market). Because why not? We’re talking 25%-28% of your portfolio, long-term that might make quite a difference. And looking at current geopolitics, I’m not so sure if “everything’s correlated anyway” or the belief in constantly increasing globalization still holds true regarding MSCI World vs. EM.

If you want to replicate VT (the market) and believe in market efficiency, I strongly think it’s best to add all components. For me, that’s

72% MSCI World
15% MSCI World Small Caps
3% Switzerland

Not perfect, but I like it :grin: Oh and deactivate rebalancing, because allocations might change over time (thanks to @Cortana for this advice).

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Personally, optimising a portfolio for diversification and fees is important - but never top priority.
Diversification just should be sufficient (and with fees, they somewhat counteract each other anyway).

Are you “maximally” diversified, when 5% of your portfolio is one stock / company (Apple)?

The Quality fund is the only equity fund I have in my finpension portfolio. We’ve had all the discussion about it and the reasons for that it here. The Quality index has consistently outperformed the “vanilla” World index over decades. Sure, that’s no guarantee for the future, but it’s the one “bet” I’m willing to take.

I think it has evidently held up for small caps. With emerging markets less so (though they’ve underperformed the developed world in USD for a quite a while).


I just checked in finpension, and there’s a small caveat. At the moment, I have the following funds:
CSIF (CH) III Equity World ex CH Blue - Pension Fund Plus ZB (TER 0.00%)
CSIF (CH) Equity Emerging Markets Blue DB (TER 0.09%)
CSIF (CH) III Equity World ex CH Small Cap Blue - Pension Fund Plus DB (TER 0.09%)

The Quality fund CSIF (CH) III Equity World ex CH Quality - Pension Fund DB Fonds has a TER of 0.13%. So while Quality might outperform the “vanilla” index, the costs for it are higher. I guess the question is: will the Quality fund outperform the “vanilla” index by an average of 0.13% per year?

I didn’t went through all 100+ posts of the other thread. It would be great if you could give a short summary @San_Francisco

If the global market agrees on that weight, then - from an efficient market point of view - it’s the right one, yes. I think Apple, in so many ways, goes beyond competition, and even if people just wrongly believe that Apple is so exceptional: beliefs are part of the market aswell.

How do they say: “Past performance is no indicator of future returns”. :grin:

I mean, if I knew for sure there is some way that diverting from the market would bring me additional returns, I’d do it. But I don’t. That’s also my main critic on the “core - satellite” portfolio: you simply cannot know which satellite (tilt) will succeed.

And if you add all tilts (aka multifactor strategy), you’re basically replicating the market again, at higher costs.

It’s just that both small cap and value have underperformed in the last 10 or 15 years. A lot of simulations and reference portfolios include small cap and value because they have overperformed in the years before 2000 (would have to check the actual year again). By choosing SC/Value factors, you hope that there will be a regression to the mean again. Which we don’t know.

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Considering how its benchmark historically did, I’m at least willing to bet it will.

The point here isn’t solely that is has outperformed its benchmark for a while. It has done so very consistently while being highly correlated (the top stocks and their weighting are quite similar - just less some things compared to the vanilla index) to the “vanilla” index. And - more importantly - the logic that profitable companies at reasonable prices will outperform non-profitable ones is at least sound.

EDIT: There’s even a version of that index that is “sector-neutral” - in other words uses the same “quality” base index but that “tilts back” sector weights to the overall market. The result is underwhelming.

Why is the world’s largest (exchange-listed) company not at the top of these indices? It’s isn’t really because of markets. It’s just because a few guys in Saudi-Arabia (the supply side) decided so.

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Why should the largest company have the highest market weight? That doesn’t make any sense to me, it’s not how valuation works.

Growth stocks might not be profitable (yet), but possibly very valuable regarding growth potential.

Did someone try to do the same with Swisscanto?

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A multifactor strategy tilts towards multiple/all factors (with multiple funds or a single fund), so you only end up with companies that fit those criterias.
For example large cap growth stocks would be excluded from the portfolio and hence you’re not replicating the market again. :slight_smile:

Sure, if you only count in the very few well-known factors, such as Fama/French. I was referring to a hypothetical fund representing all existing (known and currently unknown) factors.

My main criticism of factor investing is that I do not believe you can achieve diversification through concentration (owning a subset of the total stock market). And diversification, imo, is the only free lunch we’ll ever get. If you seek true diversification, diversify between asset classes, not within asset classes.

I also do believe that factor tilting is similar to sector tilting or even stock picking: just a bet on a certain group of stocks.

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I have around 4500 stocks from all known countries and sectors in my portfolio.
Plus tilting can also be done through changing the weight of certain securities. Not only through excluding them.

Those are certainly different things. Because you for sure lose diversification through sector tilting, which doesn‘t need to be the case with factor tilting (as described above).

Yes, that would seem more advisable to me if you feel the need to tilt and remain diversified in thousands if globally diversified stocks, no objections there (not much harm done either way). Still, I find the existing factor explanations way too simplified to explain something as complicated as markets. Also, factors never explain causality, only correlation, which might be misleading.

Anyway, I don’t see much to be won through factors, stocks remain stocks, and they remain strongly correlated to each other. Past factor premia might or might not persist, I don’t know and don’t want to bet on it. All factor premia have declined since being discovered, as far as I know. So it might be just a zero sum game in the end.