OVERVIEW
ECOFIN Investment Consulting Ltd has provided advice for over 25 years to institutional and major private clients– pension funds, foundations, family offices as well as trusts, both in Switzerland and Germany – with regard to all matters relating to investment strategy and investment management.
The starting point for strategy advice is the customer’s objectives and characteristics. From these we determine the investment strategy and concrete implementation.
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ECOFIN advice proceeds throughout the portfolio creation process:
- Choice of investment strategy according to investor aims and characteristics; in the case of institutional clients, this is based on ALM (asset liability management)
- Analysis of liabilities
- Derivation of yield target
- Analysis of investment options
- Determination and analysis of efficient investment strategies
- Selection of suitable business partners (including asset managers, custodian banks)
- Implementation of investment strategies with efficient cost-effective transition management
- Definition / analysis of investment organisation
- Compilation / monitoring of regulations, requirement specifications
- Contractual negotiations with partners
- Set-up and removal of mandates
- Investment controlling for monitoring and control of the portfolio management process.
The success of ECOFIN Investment Consulting Ltd is reflected in a stable client base with leading pension funds and well-known trusts. The basis for success is the training and also the knowhow and many years’ experience of staff members, together with ECOFIN’s independence. Staff focuses entirely on the client’s interests and acts without any conflict of interest.
Portfolio Strategy
STRATEGIC INVESTMENT ADVICE
Strategic investment advice covers all activities involved in determination, implementation and control of investment strategies. For institutional and major private investors, these activities are performed within the framework of an ALM analysis.
The priority is on customizing the investment strategy to the risk capability and risk tolerance of the investor. It is of key importance to implement a step by step approach.
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The most important stages in strategic investment advice are:
ANALYSIS OF LIABILITIES
Analysis of liabilities involves determining the assumed structure of expenditures to be financed with the assets.
In the case of pension funds, the liabilities are fairly clear. With funds used for mergers and acquisitions for example, complex problems can arise that translate into correspondingly complex investment structures.
YIELD TARGET DERIVATION
In the case of pension funds and collective foundations, this derivation also involves actuarial aspects, where issues of liquidity, available reserves, specific investment horizons and assessment of restructuring options are taken into account.
ANALYSIS OF INVESTMENT OPTIONS IN ALTERNATIVE SCENARIOS
For each investment category, the expected medium- and long-term yield and risk properties are estimated. Robust strategy proposals are produced using optimization models and simulations, corresponding to the yield target requirements.
DETERMINATION AND ANALYSIS OF EFFICIENT INVESTMENT STRATEGIES
Analysis of risks and opportunities of investment strategies is based on different key management figures in particular for pension funds: Development in the average expected coverage ratio, possible variation rate of coverage ratio, probability of certain critical coverage ratios not being met, cost of remediation in wage percentages and remediation period, etc. For other investors similar tasks are analysed depending on the nature of the task.
ECOFIN RECOMMENDATION
Based on the calculated key management figures, ECOFIN provides a recommendation for the selection of the investment strategy.
In the case of Swiss pension funds, the amount of fluctuation reserves according to the Swiss GAAP FER 26 also plays a key role. Where necessary, ECOFIN provides a professional justification for any deviations from BVV2.
Implementation
INVESTMENT ORGANISATION
ECOFIN provides its clients with advice on the structure and development of an efficient, transparent and controllable investment organisation. This ensures that the preconditions can be met for a systematic achievement of goals with low operating risk.
Investment organisation is thus a source of considerable added value, also leading to higher yields.
Typical ECOFIN services include:
- Formulation of requirements specifications with the tasks, competence and incentive structures of those responsible internally and externally, and investment guidelines. Definition of interfaces and decision making processes.
- Formulation of regulations and concepts for different issues, such as:
- Areas of application of active asset management
- Use of alternative investment tools (private equity, hedge funds)
- Implementation of currency management
- Advice regarding manager selection
- Advice regarding choice of custodian bank
- Contract design and conducting contractual negotiations with investment managers and custodian banks
- Planning and coordination with regard to transition management
- Attendance in client investment committees as advisory members.
SELECTION OF ASSET MANAGERS
ECOFIN has many years of experience in the selection of domestic and foreign asset managers. To date ECOFIN has placed several tens of billions of Swiss Francs of asset management mandates from pension funds, foundations, trusts and family offices with asset managers.
In selecting asset managers ECOFIN relies on a structured selection process, the ECOFIN Internet-based portfolio manager database (PMDB® www.pmdb-online.com), external manager databases and regular meetings with potential candidates.
The aim is to recruit the best investment manager(s) for a given purpose.
ECOFIN carries out its work completely independently and completely transparently. For each selection procedure a large number of investment managers are considered.
The submission conditions are clear, transparent and competitive.
The structured selection process consists of the following stages:
- Mandate specification
- Establishment of the investment objective
- Determination of the investment universe
- Definition of benchmarks
- Establishment of tracking error guidelines
- Definition of investment guidelines, etc.
- Generation of a short-lists (preselection of suitable investment managers)
The basis for this is ECOFIN’s own database PMDB® www.pmdb-online.com which provides information on a comprehensive number of Swiss and foreign investment managers. For each venture, the financial products offered, the investment teams, historic performance of financial products, etc. are supported. External databases are also used.
- Due Diligence
- Request for Proposal (RfP) in writing
- Analysis and evaluation of offers provided
- Provision of recommendations
- Preparation for and participation in presentation rounds
- Contract negotiations.
SELECTION OF A CUSTODIAN BANK
Major institutional investors engaging multiple portfolio managers generally use a central custodian bank for safekeeping of securities and performance measurement (Global Custodian).
ECOFIN provides client support in selecting custodian banks.
ECOFIN services include the following activities
- Mandate specification
- Establishment of a list of requirements
- Definition of constraints/conditions (e.g. reference to investment regulations)
- Generation of a short-list
- Preselection of suitable custodian banks with Due Diligence
- Request for proposal in writing
- Analysis and evaluation of offers provided
- Provision of recommendations
- Preparation for and participation in presentation rounds
- Support in selecting form of contract and in contractual negotiations.
TRANSITION MANAGEMENT
Transition Management covers planning and coordination of portfolio restructuring.
Substantially higher costs than the overall investment management costs of the next two or three years are usually topics for discussion. It pays in this case in particular to closely monitor partner activities.
Market-based solutions with high pressure of competition, transparency and also suitable incentive structures are sought in this respect.
Important factors in Transition Management are:
- Requests for quotations from brokers
- Coordination of interfaces between investment managers, brokers and custodian banks
- Detailed monitoring of trading activities of the investment managers and brokers involved.
Monitoring
INVESTMENT CONTROLLING
Investment Controlling (IC) enables ongoing monitoring and assessment of the entire investment process and completes the investment management circle. IC therefore provides an early-warning system and a management tool.
As part of Investment Controlling, a Controlling Report is produced at regular intervals – quarterly, each semester – with recommendations for the decision-making committee.
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Investment Controlling involves the following:
- Assessment of the quality of asset management
- Early identification of deviations between actual and target situation
- Introduction of immediate measures.
The basis for this is the Investment Controlling report produced on a quarterly or semester basis for the decision-making committee. This report normally includes the following aspects:
- Controlling of development of the entire portfolio and investment categories
- Assessment of overall performance compared to investment strategy performance
- Assessment of investment category performance contribution
- Assessment of mandate performance contribution
- Assessment of investment management fees
HEALTH CHECK
ECOFIN handles brief assessments both of simple portfolios as well as complex portfolio structures with regard to cost, risk and past performance.
EXPERT ASSESSMENTS
ECOFIN Investment Consulting AG provides expert assessments, reports and second opinions for investment clients.
OUR TEAM
Arno Grüter
lic. oec. HSG
Mitglied der Geschäftsleitung
+41 43 499 39 29
CONTACT US
- ECOFIN Investment Consulting AG
- Neumünsterallee 6
8032 Zürich
