Swiss pension fund PKZH, which manages CHF23.9bn in assets on behalf of more than 60,000 members, turned to Ortec Finance to gain a clearer financial picture of what its ESG exclusion policy was actually costing, or contributing, to overall fund performance.
PKZH has worked with Ortec Finance’s PEARL platform since 2011, using it as an outsourced performance measurement service to evaluate the value added at each stage of its investment process. The platform’s decision-based attribution model, combined with its ability to handle multi-asset portfolios on a fully hedged basis, has made it a long-standing fit for a fund of PKZH’s complexity.
But as ESG commitments deepened, a new challenge emerged: understanding precisely how the exclusion policy, covering violations of the UN Global Compact, controversial weapons, coal, and fracking, was affecting returns at every level of the fund.
To address this, Ortec Finance’s investment performance team restructured PKZH’s benchmark framework within PEARL across three tiers: strategic policy benchmarks at the total fund level, blended benchmarks at the asset class and sub-asset class levels, and manager-specific benchmarks at the mandate level.
Each portfolio manager was assigned a dedicated benchmark that incorporated the relevant exclusions, meaning performance could be assessed against an appropriate comparator at every decision point.
The process required integrating a significant volume of additional indices, drawing on data from providers Rimes and MSCI. Ortec Finance leveraged PEARL’s built-in data validation and ETL tooling to ensure the output was reliable, enabling the team to generate fresh reporting that accurately reflected the new fund and benchmark structures.
The result is a reporting framework that isolates the performance impact of exclusions at each layer of investment decision-making, allowing PKZH to compare outcomes both before and after the policy was introduced.
PKZH CIO Jürg Tobler said, “The flexibility of PEARL is key to us in understanding how our exclusion policy affects the fund’s performance. The detailed reports available in PEARL allow us to assess and change, if needed, our policy.
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