SESSION 3: Swiss Future Fund: Case Studies: Why & How do Swiss Pension Funds Invest in Venture Capital?

Background for the session:
The roughly 1500 Swiss occupational pension funds manage approximately one trillion Swiss francs of assets for the Swiss employed population. This means that accumulated assets under their management amount to almost one and a half times Swiss gross domestic product. This second of three pillars of the Swiss pension system is compulsory as is the first.

The economic significance of venture capital funded businesses has only started to be recognized in the last decades. Young ventures are predominant drivers of innovation. Innovation, in turn, is the main driver of economic growth in mature economies. Young, rapidly growing companies are also the main job creators, with venture capital financed companies creating up to five times more jobs than businesses that have been funded otherwise.

Switzerland is experiencing a boom of innovative start-ups, many of them spinoffs of the well-funded Swiss universities that belong to the world’s best. However, funding the growth phase of the new ventures remains a challenge. 80% of funding today comes from abroad. Often young companies then follow the money to new shores. As a result, Swiss investors miss out on the spoils and so does Switzerland as a country, as jobs and wealth are created elsewhere.

Swiss pension funds are heavy weights in Swiss capital market. As investment, venture capital is as much an art as it is a science. It requires deeply specialized and experienced teams to be successful. But when successful, it can provide very high returns. Today Swiss pension funds invest very little in start-ups. How could pension funds benefit from the high long-term returns of the Swiss start-up boom? How can the savings of millions of Swiss employees be channelled back into the real Swiss economy to create jobs and wealth for the future without endangering the safety of pensions?

Format of the session
This session with start with a presentation by Domenico Scala, the president of the Swiss Future Fund Foundation. The foundation’s idea is to create a fund that predominantly invests into Swiss start-ups. The fund would offer the often-small pension funds the possibility to purchase shares of a diversified portfolio of professionally managed venture capital without having to build up the knowledge themselves.

After the presentation a panel of experts will discuss the following questions:

• Does is make sense for Swiss pension funds to invest in venture capital?
• If it makes sense for Swiss pension funds to invest in ventures, how can they safely and profitably do so?
• How can they deal with the uncertainty and lack of liquidity that comes with venture capital investments?
• Does it make sense from a pension fund perspective to concentrate on Swiss ventures?
• Are there other possibilities to benefit from the returns of innovation?