3a solutions in the stress test - a peer group analysis

In the blog post «Sustainable retirement provision in turbulent times», we already reported that our risk-optimized equity and mixed funds reduce the investment risk compared with the market index and can cushion the price decline in negative market phases such as 2022. But how does the picture look when we compare ourselves with our direct competitors in the Swiss pension market?

The peer group

The definition of a peer group is always a difficult undertaking: who belongs in it, who doesn't? Are apples suddenly being compared with pears? Is objectivity guaranteed? We solve this problem by referring to a comparison made by Finanz & Wirtschaft on January 13, 2023. This was prepared by the financial portal moneyland.ch. It is not a conclusive list of the Swiss 3a pension landscape, but a representative overview that breaks down the (active and passive) products based on their equity content.

The OLZ retirement solutions

We are now adding the two OLZ retirement funds «OLZ Smart Invest 65 ESG» and «OLZ Equity World Optimized ESG» to this list. The former is a mixed fund with 65% equities, consisting of risk-optimized equity and bond components from OLZ. The latter, on the other hand, invests 100% in a global equity portfolio from the universe of developed markets. In line with the classification, both OLZ funds have an aggressive investment profile.

Reduction of drawdown despite higher equity exposure

The fact that the year 2022 presented special challenges can be seen, among other things, in the comparison of performance across the different risk profiles. Defensive portfolios with a high bond allocation suffered losses that were almost as large as those with a significantly higher equity allocation. The reason for this was that rising global interest rates affected virtually all asset classes, especially fixed-income investments such as bonds. Accordingly, in the case of mixed portfolios, diversification across asset classes functioned much more poorly than in previous bear markets.

In such a market phase, it becomes apparent that risk management within individual asset classes is a key element for long-term investment success. OLZ's risk-based investment approach addresses precisely this requirement and reduces both volatility and drawdown compared to the capital-weighted benchmark indices or passive investment solutions. But the comparison also shows that our funds were able to hold their own in last year's stress test, even against competing active products. Both OLZ products were able to outperform the competitors, both within their peer group with an aggressive portfolio orientation and in comparison with products with a significantly lower equity allocation.

Optimal utilization of the risk budget

However, minimizing investment risks does not only pay off in negative markets. In the context of a mixed portfolio, the risk-optimized implementation allows a higher equity quota to be run without increasing the portfolio risk overall compared with a classic (active or passive) investment solution. This allows to benefit from the long-term excess return of equities and thus to use the individual risk budget much more efficiently.