Truewealth 3a Pillar

This may also be a reason why they partially hedge equity funds in all of their standard strategies, even though foreign equity never exceeds 60%, as far as I can tell.

That’s exactly what I’d expect Truewealth to tell me, instead of some BS story about currency hedging being the way to go. It’s this kind of lack of transparancy and dishonesty which gets the finance industry its bad reputation.

Truewealth, kindly refrain from treating your customers as idiots.

The rules of the foundation in which our clients’ Pillar 3a assets are kept put some limits on the currency exposure of our clients’ 3a portfolios. We are assessing possibilities to offer more flexibility to our clients in this regard in the future.

I believe the limit on foreign currency isn’t nonsensical but is rooted in the law.

BVV 2 compliant – finpension

Investment guidelines are mentioned in the applicable regulation - though foundations can deviate from them under some circumstances. I think they really are pushing the envelope there.

Personally, I approve. Especially since the 2nd pillar system is rigged for benefit of the rich and high earners anyway (e.g. the infamous 1e plans).

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Have a look at this Geschäft Ansehen and article 50 al 4 Fedlex

In short, the limits can be exceeded

We believe that for the majority of our clients, an investment strategy consisting of approximately 100% in equities is not appropriate. We also believe that an equity strategy with a 60-70% weighting in US equities (the current market weighting) is not adequate, which is why we do not offer an ETF tracking a global index. In our opinion, a person who wants to invest in a single ETF (e.g. MSCI World) does not need the services of a robo-advisor.

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Yes, no question about that, that’s what I meant by „deviate“ above.

That said, the law - at least in principle - sets limits to FX exposure and requires CHF hedging or investments. Finpension aren’t (legitimately) deviating by some percentage points, they’re ignoring the clause altogether - that’s does feel like pushing envelope to me.

While I understand the sentiment, market cap weighted investing is popular and widely recommended as the starting point if the investor doesn’t have a reason to deviate. I still consider it odd that TrueWealth makes it more difficult to roughly follow that strategy compared to direct ETF investment at a broker.

To me, an important aspect is long term maintenance of the investment strategy. I can manually tweak the investment mix to roughly match the current market capitalization. However, a country/region’s market capitalization will change over time. If I have to tweak the investment mix regularly just so it doesn’t deviate too much from MSCI ACWI, I lose the convenience benefit a robo advisor should provide.

I’m not planning on moving back from brokers to a robo advisor in the foreseeable future. However, I certainly consider this a negative point if someone asks me for recommendations (be it for 3a or for simple investing outside 3a). Maybe that’s just me.

For a single ETF outside 3a, I agree. However, there is no option to directly use a broker for 3a. Also, wanting to invest in e.g. a MSCI World fund doesn’t mean that this would be the only fund in the portfolio. One might still want Swiss equity funds for a home bias, a small caps bias, bonds, real estate and/or commodities.

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Would you invest 60% of your portfolio in China? Or Japan? Any other single (developed) I randomly pick from a the list? Yeah, don’t think so.

Abstracting from the particular example of the United States and looking at it from a purely diversification point of view, there’s no good reason to invest 60% of your portfolio in one single country, jurisdiction and currency. It’s bordering madness. Because, globalisation or not, it’d entail a huge home bias, currency and concentration risk.

One of the main reasons why is - and stays - so much overrepresented in portfolios and indices is the widely-held firm belief in U.S. superiority: It’s supposed a „good“ country that harbours „good“ companies to invest in. That the country and its companies and currency will keep their economic, political and military power (and more business-friendly policies) for the foreseeable future. And thus outperform most others in the world - which it has done, historically. Also, don’t forget the huge cultural and media footprint they‘ve imposed on the world.

If you think an investment in a U.S. single-country index would have the same risks and chances as any other random developed country, you probably wouldn’t do it.

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It’s probably getting off-topic, however, I’m not thinking of it as investing 60% in a country. I’m investing the foreign equity portion of my portfolio in mostly global companies, 60% of which (by market cap) happen to be domiciled in the US. These companies have employees and customers all over the world, operate in diverse jurisdictions with various currencies.

Similar to how I don’t know which Swiss stock will have the best performance in the future, I also don’t know whether stock A from Europe will perform better than stock B from the US. As a passive investor I invest based on a simple strategy as I don’t have additional information. The most popular and probably simplest one is market cap weighted investing. The consistent approach is to follow this strategy independent of the company’s domicile. This is what I get with e.g. a MSCI World ETF for the developed world.

It’s not the only possible way to invest, of course. However, if you don’t think market cap weighted investing makes sense, it also doesn’t make sense to use the per-country or per-region market cap weighted indices either, in my opinion.

China is a different matter as market accessibility is not comparable to US and Europe, as far as I know.

As I don’t invest 100% of my wealth in equities and have a bit of a home bias, US-domiciled equities amount to 30% of my wealth, not 60%.

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Couldn’t agree more. Not to diversify globally is pure madness to me. ANY country can suffer political turmoil and economic demise, including the US. Look at the rise and fall of empires throughout history. Look at what happened to Japan.

Never put all your eggs into one basket.

They do - but there remains a large home bias and a concentration risk (I once looked something up for this forum).

I don’t think there’s any inherent benefit in market-cap investing.
Unless you believe in “winners are going to stay winners”.

But from a risk point of view, if you’re investing irrespective of companies’ domicile, you’re increasing the idiosyncratic risk of that country (when, factually, most of biggest companies by market cap are domiciled in that jurisdiction).

If you don’t have any information, I think is sensible to diversify away the idiosyncratic risk of single countries and take a more equal-weighted approach. You don’t have information and don’t know which countries or companies are going to perform best - so diversify.

Getting back closer to the topic, my biggest single equity investment is the MSCI Quality fund at finpension. Which boasts a whopping 76% of US stocks. But that’s a conscious decision I took in trying to predict overperforming companies.

I still think there are good reasons to choose differently and that Truewealth’s decision and reasoning to not offer a single “World” index ETF isn’t unreasonable.

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