Please help me choose pillar 3a funds (pension funds, currency, hedging, avoiding CS)

Hi everybody

With just over 25 years to go until I’ll be retiring, I finally want to get serious about pillar 3a investments. I happened upon this forum and there seem to be lots of knowledgeable people here willing to share, which is much appreciated.

I successfully dodged a bullet (I believe?) by deciding not to go with an insurance solution (Axa Smartflex) a few weeks ago. Also I just sold my very small (3.5k) UBS 3a fund that did pretty much nothing but generate fees. Now I am ready to transfer that and the rest of my 3a (~100k cash) to a solution like VIAC, finpension or TrueWealth.

And so the dive down the rabbit hole began, and after a week of research, my questions still remaining are:

  1. What currency should funds ideally be bought in? I could buy CHF funds only, so any currency exchange is done «inside» the fund, or buy funds in various currencies and pay currency exchange fees (0.75% with VIAC, 0.1% with TrueWealth, 0% with finpension). My understanding is that letting the fund handle it is the cheapest option, correct?
  2. After reading various posts here and articles around the web, it seems like CHF hedging is unneccessary in my case, as it’s only useful for short-term investments, correct? So I should invest as much as possible into non-hedged funds and only go for hedged ones if the platform requires it (I think VIAC does)?
  3. Is it wise to newly invest in Credit Suisse funds, when there’s the risk of them being liquidated in 1-2 years (possibly incurring fees to switch to other funds)? TrueWealth doesn’t offer to opt-out of CS funds, VIAC and finpension (via custom strategies) do.
  4. Does it make sense to only buy Swiss index pension funds (TrueWealth doesn’t offer this option), as they are able to get back more taxes from foreign companies?

Right now, based on above considerations with a healthy dose of gut feeling/emotion, I would go for 99% stocks with worldwide, non-hedged, accumulating Swiss pension funds in CHF not by CS with a home bias. That would mean either:

finpension with:

  • 80% Swisscanto (CH) IPF I Index Equity Fund World ex CH NT CHF (CH0117044948)
  • 10% Swisscanto (CH) Index Equity Fund Emerging Markets NT CHF (CH0117044971)
  • 9% Swisscanto (CH) Index Equity Fund Switzerland Total (I) NT CHF (CH0117043700)
  • 1% cash

or VIAC with (slighty more complicated, as they restrict non-hedged funds and don’t offer CH Total):

  • 50% Swisscanto (CH) IPF I Index Equity Fund World ex CH NT CHF (CH0117044948)
  • 30% Swisscanto (CH) IPF I Index Equity Fund World ex CH NTH1 CHF (CH0296590281)
  • 10% Swisscanto (CH) Index Equity Fund Emerging Markets NT CHF (CH0117044971)
  • 6% Swisscanto (CH) Index Equity Fund Large Caps Switzerland NT CHF (CH0215804714)
  • 3% Swisscanto (CH) Index Equity Fund Small & Mid Caps Switzerland NT CHF (CH0132501898)
  • 1% cash

Are these portfolios reasonable? Which of these two would you choose, or what would you change and why?

Bonus question:
I plan on investing a larger sum of money (200k) in about a year, when my current «Festgeld» runs out. I read that both finpension and VIAC are planning on offering a non-pension investment solution which would make them a combined investment solution like TrueWealth. Should I wait and see how these offers turn out so I can use the same service for both? Is it even a good idea to pool 3a and other investments?

No - I see two issues.

  1. you don’t take into account the legally mandated minimum exposure towards Switzerland of 40%

  2. you don’t consider that it would be more beneficial to have higher CH exposure in pillar 3a, and lower CH exposure in your after-tax investing.

If you want some CH exposure, figure out how much (in % of your global portfolio) that would be, then put more of it into the third pillar (while also respecting the legal minimum).

That’s assuming you’ve checked that those funds you list actually exist on all platforms. :wink:

For VIAC, the mandated exposure is 40% to CHF denominated funds/assets (incl. cash), not to Switzerland specifically. The proposed allocation is viable and sounds good enough for me.

Regarding CS vs Swisscanto, I think concerns were warranted in the timeframe before UBS bought it. As of now, they’re as secure as UBS funds with the risk of being discontinued, or that previous deals with 3a providers would not be renewed, increasing their cost. The cost of changing to a different set of funds at that point would be minimal, if any. The loss of exposure to the markets would probably be a matter of days, if any.

As a former advocate against using CS funds, I’d not even blink once before going for them now.

1 Like

Why? Switzerland is far from being most dividend-heavy among different geographic segments (MSCI).

In addition you can easily reclaim withholding taxes on dividends for CH securities, where it might be more difficult/impossible for other countries.

  1. So finpension is actually doing something illegal by allowing me to have unlimited unhedged foreign currency exposure?
  2. How high would you go? The 40% in the predefined strategies of both VIAC and finpension seem excessively high to me.

Yes, that’s why they differ not only in their foreign currency exposure but also WRT CH exposure; I used what was available on the respective platform (I made accounts (without any money in them) on both platforms and I defined above portfolios via custom strategy).

But do they offer any advantage over Swisscanto (or UBS with finpension)?

No, not at all. There’s no law that requires individual investors to have a certain % hedged to CHF. There are the BVV2 rules that apply on a foundation level, but you as an individual investor don’t need to care about that.
However, VIAC limits your foreign currency exposure, while finpension doesn’t.

Where is that stated? Please show me the law? That’s just not true, I work at an investment foundation and this would be news :slight_smile: I have 99% invested in the World ex CH Quality fund, which has no CH exposure at all (as the name says ;))

There are slight differences as explained here, however at the end of the day the differences are negligible. I choose CS at finpension because they are the only ones that have the World ex CH Quality fund.

1 Like

Personal opinion they might follow the letter, but don’t think they follow the spirit of the law :slight_smile:

(Don’t think the law had individual/direct investment strategy like modern fintech do in mind, I’m not going to complain about this tho :slight_smile: )

1 Like

Interesting. I saw a discussion on this forum I believe, arguing for investing into the MSCI quality fund. Might read up on that a bit more.

It’s this one here, right?
EDIT: here are the correct links to the fact sheets for both the hedged and unhedged fund.

Yes, exactly. But do your own research and assessment of your risk profile before investing in it (or anything at all).

Your link is the wrong one / not the quality one.
Look for this one:
CSIF (CH) III Equity World ex CH Quality -
Pension Fund DB

You’re right, thanks. I’ve edited my post above.

Weirdly, when customizing the strategy on finpension, the unhedged Quality fund doesn’t show up when limiting the search to CS funds.