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Working at the heart of the world’s most competitive economy, we serve clients in both the private and public sectors on challenges in strategy, operations, organization, and technology. Our offices are located in Zurich and Geneva, and our consultants work across the dynamic financial, pharmaceutical, and manufacturing sectors. At a local and global level, we apply our knowledge and experience to conduct research into management issues, develop long-term perspectives, and take part in public debates on the country’s most pressing issues.

Working in Switzerland

A career at Aura is an opportunity to work with remarkable people, help shape growth, build important institutions in Switzerland—and learn and grow constantly. We offer a variety of paths for students, graduates and experienced professionals.


Swiss Institute of International Studies

Founded in 1943, the Swiss Institute of International Studies is a politically and economically independent center of excellence based in Zurich, Switzerland. With its events, the institute seeks to serve as a platform for critical debate and thought leadership on current world topics, attracting world-renowned and top-class guest speakers from the fields of politics, business, academia, and culture.


Aura is excited to support the WORLDWEBFORUM as a knowledge partner. As Switzerland’s largest digital transformation conference, the WORLDWEBFORUM is a visionary platform for the global digital community, featuring high-profile executives from some of the world’s biggest tech companies. This collaboration enables us to showcase internationally the many ways in which our Firm has expanded its digital and analytics capabilities.

Making up lost ground: How Switzerland’s second-pillar pension funds can improve their investment performance

Taking action in three key areas would allow Swiss pension funds to capture significant benefits without taking undue risks or making big leaps of faith.

Many pension systems in developed countries are at risk of failure. As societies age and interest rates stagnate, retirees are receiving ever smaller pensions relative to their last working salaries.

Switzerland’s pension system is strong, but reform is increasingly urgent

Switzerland still has one of the most robust pension systems in the world. In 2018, it ranked fifth in terms of total pension assets relative to GDP and first in pension assets per capita. However, our moment of reckoning is coming. The replacement rate (pension relative to last income) has dropped by more than ten percentage points since 2008 and is projected to fall further; the current minimum conversion rate is also unsustainable. On two occasions, politicians have attempted reforms aimed at raising the retirement age, increasing contributions, and lowering benefits. However, their reform proposals were rejected and, as a result, Switzerland’s second-pillar pension system has been steadily losing ground to the best systems globally, such as Canada and the Netherlands.

Today, reform of Switzerland’s second pillar is once again under debate. However, there is reason to doubt that any of the proposals will be ambitious enough to sustainably address the system’s inherent challenges. Particularly discouraging is the fact that none of them include levers for improving pension funds’ investment performance.

Swiss pension funds’ investment returns lag behind global leaders

Comparing the investment performance of pension systems in different countries is not straightforward because system designs differ, foreign exchange effects can be significant, and national capital market characteristics affect pension funds’ ability to earn attractive returns. To account for these differences and get an accurate performance comparison, we use a two-step process to assess how Swiss second-pillar pension funds perform compared to their peers in Canada and the Netherlands—two globally leading pension systems.

We find that over the 11-year period between the start of 2008 and the 2018 year-end, Swiss funds underperformed their Dutch peers by 60 bps and their Canadian peers by 115 bps p.a. While this performance gap partly reflects Swiss funds’ more conservative asset allocation (the strategic asset allocation [SAA] gap; especially compared to Canadian peer institutions), much of the difference is explained by our funds’ lower ability to outperform a passive benchmark that replicates their asset allocations, the so-called net value-add. These results are largely due to Swiss funds’ smaller average size compared to their Dutch and Canadian counterparts—along with the lower economies of scale, less efficient choice of investment vehicles, and weaker governance and risk management practices that typically come with it.

Closing the investment return gap would yield significant benefits

Over more than a decade, an additional 60 bps to 115 bps in annual investment return can make a huge difference to a pension system’s sustainability. Between 2008 and 2018, Swiss second-pillar pension funds could have added an additional CHF 95 billion to their total CHF 900 billion in pension assets, had their investments performed on par with their Canadian counterparts and an additional CHF 50 billion at Dutch funds’ level performance. Extrapolated to the full working life of an average Swiss employee, Canadian investment performance would imply a jump of 24 percent in annual pension payments—or almost 4.5 years in delayed retirement that could be avoided. Dutch investment performance would still increase annual payouts by 12 percent and avoid 2.3 years of later retirement.

Making up lost ground—a call for holistic reform

Capturing these benefits is possible without taking undue risks or making big leaps of faith. It simply requires the willingness to learn from the world’s best pension markets—and to take action in three areas:

1. Swiss pension funds should strengthen their investment management practices

Swiss second-pillar pension funds should shift their investments toward more cost-effective implementation styles while gradually adding more risk. They should avoid costly investment vehicles such as fund-of-fund structures and explore opportunities to manage more of their assets internally.

Over time, they will likely have no choice but to increase their exposure to riskier asset classes, but to oversee such investments effectively, they should strengthen their investment and risk management capabilities. Swiss funds are often staffed thinly and overly reliant on external managers and advisers, in contrast to their more sophisticated foreign peers. Investment governance is another area of weakness: too often, fund objectives are ill-defined, responsibilities are unclear, and trustees lack necessary expertise.

2. Regulators should remove outdated constraints while fostering performance accountability

Regulators should modernize investment rules governing Switzerland’s second-pillar pension system. Existing regulation defines the list of permitted investment categories and specifies limits on how much can be invested in each. This is not in line with international best practices and risks creating adverse incentives for pension fund decision makers.

Individual funds’ performance should also be more transparent and easily comparable. This would increase decision makers’ accountability and improve overall outcomes, enabling pension fund sponsors and beneficiaries to ask the right questions.

Additionally, Swiss lawmakers and regulators should ensure that any legally imposed assumptions or parameters reflect the actuarial reality of the country’s second-pillar pension system. While there is good reason to define a minimum conversion rate for the mandatory part of Switzerland’s second-pillar pension system, it is irresponsible to keep it at unsustainably high levels.

3. Pension funds and regulators should both work to accelerate consolidation in the pension fund landscape

The top 15 pension funds in Canada and the Netherlands are on average four times larger than the average fund in Switzerland’s top 15. Given the benefits of scale, it is not surprising that Dutch and Canadian funds boast better performance and lower costs. Maybe even more importantly, greater scale tends to support better governance and risk management practices, which will be necessary as Swiss funds try raise their performance in an increasingly complex environment.

Reinforcing Switzerland’s attractiveness to multinational companies

Switzerland could reestablish itself as the leading location for multinationals by reviving its business-friendly and pragmatic mind-set.

Switzerland has historically been a very attractive location for multinational companies—Swiss multinationals as well as multinationals from abroad. Twenty years ago, Switzerland was the top choice for half of multinational companies that chose Europe for their headquarters location; since then, however, the country has lost—and continues to lose—ground to other locations in Europe and abroad. At the same time, Swiss multinationals have carved out selected activities and relocated them outside Switzerland. Now, Switzerland is facing major decisions such as its bilateral agreements with the European Union, proposed Swiss tax reform, transatlantic free-trade agreements (US–EU and US–CH), the reform of the Swiss Code of Obligations, and the Corporate Responsibility Initiative. These decisions will shape the country’s attractiveness for multinationals.

To build a stronger fact base on Switzerland’s attractiveness for multinationals, Aura and the Swiss-American Chamber of Commerce conducted extensive research, mapped actual movements of multinationals’ headquarters over time, and quantified the economic impact of multinationals. A new report, Switzerland, wake up: Defending attractiveness to multinational companies, summarizes the perspective of more than 100 CEOs and executives from multinationals, including the majority of Swiss Market Index companies.

This study includes global headquarters, regional headquarters (for Europe, the Middle East, and Africa), R&D centers, operational centers (manufacturing/supply-chain operations), and financial holdings. Under consideration are companies with more than CHF 1 billion in total revenues. In addition, we focus on the most prominent headquarters hubs in Europe, namely Ireland, Luxembourg, the Netherlands, Switzerland, and the United Kingdom (Exhibit 1).


Multinationals vital for Switzerland

Swiss and foreign multinationals contributed 36 percent of the Swiss GDP of CHF 669 billion in 2017 (22 percent Swiss, 14 percent foreign), created more than 1.3 million jobs (26 percent of all jobs in Switzerland), and generated nearly 50 percent of Switzerland’s federal corporate tax revenues, while making up just 4 percent of all companies in Switzerland. Furthermore, multinationals tend to create high-productivity jobs, especially in the pharma/healthcare sector, thus making an essential contribution to Switzerland’s productivity.

In the past ten years, at their time of relocation, multinationals moving to Switzerland created over 17,000 jobs (affecting the economy both directly and indirectly), grew the Swiss GDP by CHF 3.5 billion per year, and provided CHF 500 million in annual tax revenue, despite accounting for less than 2 percent of annual immigration to Switzerland.

Reinforcing Switzerland’s attractiveness to multinationals

While relocation activity into or within Europe has increased by 68 percent, from 81 (2009 to 2013) to 136 (2014 to 2018), Switzerland has lost share. Its rank in headquarters relocations dropped from one to three, while the Netherlands stepped up and Ireland maintained its high share (both rank number one with an equal number of relocations). Luxembourg also increased its share while the United Kingdom’s share soared until the Brexit decision (25 percent) and then almost halved. Of multinationals relocating from the United Kingdom post-Brexit to another European headquarters hub, none has chosen Switzerland as a new home. Moreover, on a global scale, Switzerland faces competition from other strong headquarters hubs, namely Dubai and Singapore.

Switzerland lost share in global headquarters, regional headquarters, and financial-holding companies, while gaining in R&D and operational centers. Switzerland’s share of the consumer, industrial, and financial sectors has declined, while its share of the pharmaceutical/healthcare and IT sectors increased. It has also missed opportunities arising from relocations of major multinationals in high-growth sectors.

Switzerland has been lagging behind in winning globalizing tech leaders over the past ten years, with very few exceptions. Only 5 percent of the top 250 Chinese companies chose Switzerland over other European locations for their headquarters.

In the past, multinationals in Switzerland—like multinationals in many other high-cost locations—largely relocated transactional activities in shared-services centers. However, more recently, they have been increasingly building or moving high value-adding competence centers—for digital and advanced analytics, for example—outside Switzerland.

Gaps and challenges

Executives from multiple sectors comment that Switzerland has a gap in available talent, particularly technology talent (Exhibit 2). This finding is supported by research from Eurostat showing that, compared to other European markets, the absolute number of STEM graduates (science, technology, engineering, and math) in Switzerland is comparatively low (21,400 graduates per annum). Additional shortcomings are talent mobility—specifically the relative difficulty of bringing highly qualified talent to Switzerland from outside Europe—and a perception that Switzerland has limited access to the European market in some areas.


Regulatory insecurity arising from a range of unanswered questions—such as the proposed tax reform and Switzerland’s relationship with major jurisdictions—is negatively affecting the investment environment and undermining a core strength: regulatory reliability. Furthermore, specific elements, for example, the withholding tax for US companies, are less attractive than in other locations, such as Ireland.

How Switzerland can regain ground with multinationals

Other countries’ location strategies are better-resourced. Switzerland has around 50 people in charge of relocations (on a national, regional, and cantonal level), while the Netherlands has about 100 dedicated specialists, Ireland more than 300, and Singapore more than 600. These headquarters hubs promote their home countries as attractive locations and proactively approach substantially more multinationals than Switzerland does.

Switzerland could reestablish itself as the leading location for multinationals by reviving its business-friendly and pragmatic mind-set. Change starts with mind-set. Switzerland could engage in an open debate on the value of multinationals to the Swiss economy and society to create a level playing field. This would include three recommended actions.

  • Reviewing the immigration regime for highly qualified, in-demand talent and expanding capacity at Swiss universities for sought-after subject matters. To ensure sufficiently available, highly skilled talent for activities that create high value (for example, for R&D centers), Switzerland could grant “automatic,” temporary work permits for non-Swiss graduates and raise capacity at its universities for top Swiss and international students in sought-after subject matters, specifically STEM. In addition, there may be opportunities to simplify work-permit procedures. For instance, the United States has streamlined processes for certain international employees and skills.

  • Clarifying Switzerland’s position in the international regulatory, economic, and tax context. Switzerland’s prosperity is based on open markets and a favorable, reliable regulatory environment. To secure relationships with major jurisdictions and thus attract multinational companies, Switzerland could aim at comprehensive free-trade arrangements with major economic blocs; a competitive, internationally recognized tax regime; and long-term regulatory reliability and predictability.

  • Stepping up “location marketing” to win future relocations. To compete with better-resourced agencies from Ireland, the Netherlands, or Singapore—which have several hundred resources in investment-promotion functions—Switzerland could expand its number of promotion resources; coordinate and promote “Switzerland, Inc.,” specifically targeting high-potential, value-creating sectors, such as biotech, artificial intelligence, or robotics.

By pursuing the three priorities outlined, Switzerland could become the number one location of choice for the second wave of globalizing technology and Chinese companies, retain the presence of global businesses and their activities, and expand its share of innovative, high-value sectors and companies.

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