We are living longer than ever before, a remarkable achievement that also brings new complexities. At BNP Paribas in Switzerland, we are proactively addressing this megatrend by exploring new fields like longevity, healthy nutrition, and innovative healthcare solutions.

This article, initially published in Finanz und Wirtschaft, incorporates the perspectives of our Deputy Global Chief Investment Officer, Guy Ertz. It examines how extended lifespans are redefining our society and creating significant economic and investment opportunities in areas such as health, wealth, and the promising investment avenues that arise from our pursuit of a longer, healthier, and more fulfilling life.

Getting Older Without Feeling Old

Finanz und Wirtschaft
11.06.2025

We are living longer than ever. But this increasing longevity also brings new challenges. BNP Paribas has taken on this issue and is investing in new areas such as longevity, healthy nutrition, and retirement planning solutions.

Over the last 150 years, human life expectancy has nearly doubled thanks to medical and societal advances. Scientific breakthroughs promise to extend life even further, supported by declining alcohol and tobacco consumption, technological innovation, and new lifestyle trends.

The focus has thus shifted to extending healthy life expectancy – the number of years lived in good health before death. Achieving this goal is vital for adding happy years to life while reducing age-related healthcare costs.

Anti-aging medication

Anti-aging drugs aim to prolong both lifespan and health span and could revolutionize how we deal with aging and age-related diseases such as obesity, cancer, and Alzheimer’s or dementia. Treatments like fasting and calorie restriction, which regulate blood sugar and improve insulin sensitivity, have proven effective in delaying age-related diseases.

GLP-1 inhibitors, for example, are effective in treating type 2 diabetes and promoting weight loss, while also lowering the risk of cardiovascular disease, stroke, cancer, and dementia.

New cancer treatments using immunotherapy, CAR-T cell therapies, and advanced radiotherapy improve long-term survival rates. Numerous new Alzheimer’s drugs have recently shown they can slow cognitive decline by over 25% in just 18 months.

Preventive healthcare

Prevention is far more cost-effective than treatment, which is driving rapid growth in early diagnostics and wearables. Devices like glucose monitors and smartwatches now track a wide range of health data.

An aging population will inevitably boost demand for glasses, contact lenses, hearing aids, and other senior-focused medical equipment. There will also be increased demand for assisted living facilities and senior residences.

Growing “grey” purchasing power

As people live longer and healthier lives, seniors will also enjoy greater purchasing power. According to U.S. nonprofit AARP, people over 50 already account for 50% of global consumer spending, and that figure is projected to reach almost 60% by 2050.

Sectors that will benefit from this “grey” purchasing power include food services, travel, insurance, and senior-focused fashion and footwear.

The longevity era

Rising life expectancy calls into question traditional retirement ages. Many future retirees are choosing to stay active longer—not just for financial reasons but also to stay engaged and productive.

Continuing to work brings health benefits, including improved cognitive function and reduced dementia risk. This trend creates new wealth management opportunities, as people save and invest longer before drawing on their retirement funds.

Promoting Healthy and Sustainable Nutrition

BNP Paribas invests in the field of nutrition primarily in sustainable and healthy food companies, as well as in innovative solutions along the entire food value chain. BNP Paribas also supports educational and awareness-raising programs that promote healthy and sustainable nutrition, for example through a partnership with the Swiss Food Academy, which introduces sustainable eating habits to schoolchildren.

Through the thematic fund “THEAM Quant – Healthy Living Opportunities,” BNP Paribas also invests in companies that produce natural, organic, or functional foods, as well as in companies developing sustainable packaging and delivery solutions.

The fund combines nutrition with health and wellness as a growth market. Sustainability and ESG criteria play a central role in the selection of investments in the food sector, aiming to achieve both financial returns and positive ecological and social impacts.

In summary, BNP Paribas primarily invests in food through thematic funds focused on sustainable, healthy, and innovative food companies, complemented by social engagement to raise awareness about sustainable nutrition.

Sustainable Food

The BNP Paribas Swiss Foundation was established in 2002 to foster dialogue between the bank and society on cultural, social, and environmental issues. In 2022, to strengthen its commitment to environmental matters and in line with BNP Paribas’ engagement to raise public awareness on climate change and biodiversity, a partnership was launched with the Swiss Food Academy (SFA), whose main objective is to raise public awareness about healthy and sustainable food.

The organization brings together experts in nutrition, education, health, and sustainable development who create high-value content for schools, public authorities, individuals, and professionals.

From 2022 to 2024, the foundation was among the supporters of the program “Paprika – my school committed to healthy and sustainable nutrition” in Zurich. This educational project aimed to introduce 8- to 12-year-old schoolchildren in the Zurich region to healthy and sustainable nutrition through educational and playful methods.

Investing for a Longer and Happier Life

BNP Paribas invests — with a focus on equities, real estate and private equity — in selected pharmaceutical stocks and medicines, as well as in biotechnology and medical technology. It also invests in real estate funds focused on healthcare, health technology, healthy and sustainable food, consumer goods and service companies strongly oriented towards the elderly, and in financial services such as asset and wealth management and health insurance.

BNP Paribas also invests in the theme of longevity across various asset classes and sectors. The focus is on:

• Equities in companies from the pharmaceutical, biotechnology and medical technology sectors that develop innovative solutions for age-related diseases and healthy ageing;
• Real estate funds and REITs focused on healthcare and care facilities;
• Companies in health technology, wellness, healthy food, and nutritional supplements;
• Consumer goods and service companies specifically targeting older populations;
• Financial services such as wealth management and health insurance tailored to the needs of an ageing population.

Strategy: BNP Paribas sees longevity as one of the most important investment trends in the coming years. The bank considers rising life expectancy to be both a societal challenge and an economic opportunity. It recommends investments that both respond to the needs of older people and benefit from demographic change. For example, the “BNP Paribas Funds Global Megatrends Life” fund invests globally in companies with strong governance that benefit from megatrends such as demographic change and longevity.

Innovation: BNP Paribas sees the future of financial planning in the integration of health and wealth management. Health is viewed as an asset that should be actively maintained. Future financial products could incorporate health data directly into financial planning in order to create personalized retirement and investment strategies.

For private clients and entrepreneurs in Switzerland, effectively integrating pension planning into a comprehensive wealth strategy is essential. This article, featured in the Neue Zürcher Zeitung (NZZ), examines how BVG 1e plans offer tailored solutions for optimising retirement assets. Discover the advantages and considerations of integrating these specialised pension solutions.

Using 1e Plans to Integrate Pension Provision into Wealth Strategy

Neue Zürcher Zeitung
18.05.2025

For high earners and entrepreneurs, retirement planning is not just a legal obligation — it also requires foresight and precision. BVG 1e solutions provide an effective answer to this challenge.

Switzerland’s pension system is considered solid—but standardized models quickly reach their limits. For entrepreneurs and employees with high incomes, individualized and long-term concepts are needed—ones that consider all existing wealth components comprehensively in order to manage assets effectively. The need for flexibility in retirement planning is particularly addressed by the so-called 1e pension plans. As part of the occupational pension system (BVG), 1e solutions—together with the first pillar—offer basic coverage in retirement, as well as in cases of disability or death.

This specific type of pension plan allows high earners to invest the non-mandatory portion of their retirement capital with greater flexibility, thereby expanding their individual scope in retirement planning.

How 1e Plans Work – An Overview

BVG 1e solutions are a form of occupational pension aimed at individuals with annual incomes above CHF 136,080. The term “1e” is derived from Article 1e of the Ordinance on Occupational Retirement, Survivors’ and Disability Pension Plans (BVV2), which defines the conditions for this specific pension solution. This income threshold corresponds to the upper limit of insured earnings, up to which the BVG security fund guarantees mandatory benefits. Above this threshold, the insured individual assumes their own investment risk.

What sets 1e plans apart is the freedom of choice for policyholders: unlike traditional BVG plans, where the pension fund dictates the investment strategy, 1e solutions allow insured individuals to choose how their retirement capital is invested.

The Growing Importance of BVG 1e Plans

Occupational pensions—and 1e plans in particular—are becoming increasingly relevant in light of Switzerland’s demographic trends. According to a 2023 study by the Federal Statistical Office (FSO), the proportion of people over 65 in the Swiss population will rise to nearly 30% by 2050. This means fewer workers supporting more retirees. In recent years, overly generous and guaranteed retirement conditions have led to a redistribution of pension fund returns—despite the original intention of the pension system being based on individual savings (the capital-funded method).

Currently, a portion of capital market returns is being used to finance retirees’ pensions. In 2021, the Swiss Pension Fund Association (ASIP) estimated this redistribution at around CHF 7 billion. The opportunity costs for policyholders due to overly conservative pension fund investment strategies are not even included in this figure. A 1e plan can help counteract this disadvantageous redistribution within occupational pension schemes.

Benefits for Employees

It is the employer—not the individual employee—who decides whether to join a BVG 1e pension foundation. When well-designed, these plans offer numerous benefits to employees: for example, they can choose from up to ten investment strategies for their 1e plan. This enables them to align their pension capital with their broader wealth strategy, in accordance with their personal risk capacity and risk appetite.

Naturally, these advantages are accompanied by potential risks, which require personalized planning, clear risk disclosure, and professional advice and support.

Another advantage of occupational pensions is the potential for tax optimization through voluntary contributions to the second pillar. In Switzerland, such contributions can be deducted from taxable income, thereby strengthening individual pension provision and significantly reducing tax burdens. While this benefit is not exclusive to 1e plans, policyholders in these plans fully benefit from long-term investment performance. For business owners in particular, attractive withdrawal strategies can be developed within the interplay between salary, dividends, and BVG contributions.

Advantages of 1e Plans for Employers

A 2022 pension study by Swiss Life shows that an increasing number of companies are adopting 1e solutions to attract and retain talented employees. Since not only the investment opportunities but also the risks are transferred to the employees, the financial risk for the employer is reduced.

Depending on the accounting standard—especially under IFRS or US GAAP—BVG 1e solutions can help shift pension liabilities off the balance sheet. This can improve key financial indicators, which is particularly relevant for internationally active companies with strict reporting requirements.

1e solutions have been available in Switzerland since 2006. They gained popularity after the mandatory minimum guarantee for vested benefits was abolished in 2017. According to a 2023 analysis by PricewaterhouseCoopers, more than 45,600 individuals were already enrolled in a 1e plan.

Holistic Wealth Strategies

From a financial planning perspective, a solid and holistic investment strategy is the foundation for successful long-term wealth allocation. It is crucial to consider not only existing liquid and illiquid assets as well as pension assets, but also to include future “cash events” in the planning process.

One often underestimated aspect of wealth planning is the strategic use of debt capital—particularly in the context of succession planning. Early involvement of all stakeholders and a comprehensive needs analysis are essential to carefully assess all options in this complex process. This reduces the risk of unexpected developments and increases the chances of long-term success. This way, intergenerational financing strategies can be optimally aligned, and assets transferred in a planned manner into individual wealth structures.

BNP Paribas is one of Europe’s most solid banks—with regard to both size and balance sheet quality. This enables the bank to support and manage very large and complex financing projects, both in Switzerland and internationally. By focusing on innovative, high-growth companies, BNP Paribas can foster synergies between entrepreneurial growth and private wealth management.

When implementing the defined investment strategy, customizable wealth management must be complemented by robust platforms for structured products and FX trading. This ensures that market opportunities can be seized quickly and precisely. A key asset class is private markets: with exposure to private equity, private debt, or real assets, they not only provide diversification but also access to attractive return sources. BNP Paribas offers clients selective access to leading funds and direct investments—embedded in a strategically coordinated wealth allocation.

When it comes to preparing for retirement, standard solutions often fall short – particularly for entrepreneurs and wealthy individuals with complex financial situations. Yusuf Savmaz, Head of Switzerland Domestic for BNP Paribas Wealth Management, and Manuel Egger, Wealth Planner for BNP Paribas Wealth Management, shared their insights in Finanz und Wirtschaft, on how integrated, forward-looking planning can make all the difference.

Wealth Architecture with Foresight

Finanz und Wirtschaft
11.04.2025

Early, strategic planning for retirement provision is of paramount importance. All assets should be considered as a unified whole.

Yusuf Savmaz, Head Switzerland Domestic, Wealth Management, BNP Paribas Switzerland
Manuel Egger, Wealth Planner, BNP Paribas Wealth Management Switzerland

Retirement provision is like a complex puzzle – especially for wealthy individuals and entrepreneurs. Standard solutions quickly reach their limits. The key difference lies in a comprehensive consideration of all assets. Tools such as BVG 1e pension plans and international aspects are becoming increasingly important.

For individuals earning over CHF 136,080 per year, BVG 1e plans offer an attractive supplement to the traditional pension fund solution. Unlike conventional options, these plans give the insured greater control over their retirement planning. This allows them to seamlessly integrate supplementary pension benefits into their individual wealth planning. For high earners, it is all the more important to focus on retirement provision, as their income tends to drop significantly post-retirement. This makes it essential to cover or reduce living expenses with planned asset drawdowns.

Time as a Key Factor

Time planning plays a crucial role in retirement provision. Those who determine early on which funds need to be available when can act in a more targeted manner and benefit from significant tax advantages.

Clients often have multiple residences in different countries, live under different marital property regimes, or operate internationally active businesses. Their asset situations are complex, for example due to a high proportion of tied assets. In such cases, it is essential to analyze the legal and tax framework – whether for acquiring property abroad or cross-border inheritance planning.

Another important factor: Strategic planning must consider all assets – company structure, private wealth, and pension capital – as a whole. Many bank clients are entrepreneurs whose wealth is spread across various structures. This opens up special structuring opportunities: under certain conditions, company profits can be transferred in a tax-optimized way into retirement provisions such as the 1e solution. Indeed, only a precise, individualized analysis of all assets and retirement goals unlocks the full potential of integrated retirement planning.

Complex Succession Planning

When it comes to the biggest “blind spot,” experts agree: succession planning usually starts too late. For clients, retirement planning is not a routine task – it’s a once-in-a-lifetime responsibility. Entrepreneurs often underestimate the complexity of generational transitions.

For wealth planning experts, this complex transfer process is a key moment and success factor in their advisory work. A long-term strategy – spanning five to ten years – can help to transfer wealth in a structured way. Solutions such as tax-optimized transfers or the establishment of a family office can offer decisive advantages.

Age-Appropriate Strategy

Throughout life, the demands on wealth management change. Between the ages of 40 and 60, the focus is on wealth accumulation. From retirement onward, preserving and drawing from capital becomes the priority. A flexible investment strategy enables a smooth transition. A gradual reduction in alternative investments such as hedge funds or venture capital in favor of more stable investments can be beneficial to adapt the portfolio to changing needs.

Wealthy individuals with international exposure often benefit from an integrated wealth structure that considers cross-border financial and tax issues. Tailored solutions are particularly necessary for wealth transfers or financing investments abroad. Access to international financial markets and the use of global expertise are in high demand.

Early, strategic planning is the key to sustainable retirement provision. It enables individuals to achieve their personal goals while making the best possible use of legal and tax frameworks.

On March 27, in London, BNP Paribas Wealth Management in Switzerland has been named Best International Private Bank in Switzerland for the third consecutive year during the Euromoney Global Private Banking Awards 2025 ceremony.

This award is a true recognition of our commitment to supporting Entrepreneurs and Leading Families with bespoke solutions, combining private and corporate shareholders. It is also a tribute to the hard work and expertise of our teams in Geneva, Zurich, and Lugano, who embody the entrepreneurial spirit that drives us forward.

BNP Paribas Wealth Management’s strategy is built on the strength of the Group’s distinctive model, enabling them to serve entrepreneurs and leading families. With a dynamic and adaptable approach, they empower the next generation of business leaders while cultivating specialized expertise to address both private and corporate challenges.

“This recognition highlights our commitment to excellence and our ability to anticipate and support our clients’ needs with tailor-made wealth management solutions.”

Beat Bachmann – CEO Wealth Management Switzerland & Emerging markets
             

Watch Beat Bachmann, CEO Wealth Management Switzerland & Emerging markets at BNP Paribas sharing his appreciation in the video below:

A heartfelt thank you to our clients for their trust and to our teams for their continuous dedication. 

This is a translation from the original article published in German in NZZ in which Guy Ertz, Deputy Global Chief Investment Officer for BNP Paribas Wealth Management, shares BNP Paribas’ key investment themes for 2025.

Opportunities and Risks of the Goldilocks Economy

NZZ
24.01.2025

Five key trends are emerging that investors can take advantage of: In addition to lower interest rates and the modernization of infrastructure, broader diversification, targeted AI investments, and opportunities in the healthcare sector are coming into focus. Particularly interesting is the megatrend of aging, which more and more companies are focusing on. Here are the five most important recommendations at a glance:

Opportunities through Monetary Policy

Lower interest rates support credit-financed investments such as real estate, infrastructure, and private equity. Real estate funds in the Eurozone appear particularly attractive. Short-term interest rates are likely to fall faster than long-term rates this year, benefiting banks. US financial institutions also benefit from planned deregulation.

Economic development in the US and China is expected to slightly decline at a high level, while Europe anticipates moderate recovery. In Switzerland, economic growth of one percent is forecast for 2025.

The decision of the Swiss National Bank (SNB) to cut the key interest rate by 50 basis points shows its determination to counter deflation risks. Another reduction of 25 basis points could follow in March.

What does this low-interest-rate environment mean for investors? Swiss stocks continue to offer more attractive potential with an average dividend yield of three percent compared to government bonds with yields below one percent. One should decide based on their own risk profile.

Infrastructure as a Key Theme

Physical and digital infrastructures are essential for connecting people and providing them with goods, information, and resources. Roads, the internet, energy, and water supply ensure access to basic necessities.

Investments in infrastructure are further accelerated by technological advances and climatic challenges. Examples of interesting investment opportunities include transportation infrastructures in the US and Europe, as well as US energy infrastructure for liquefied natural gas. Companies involved in drinking water treatment also offer potential.

Companies developing security solutions against cyber threats and the industrial metals sector, such as copper needed for modernizing the electricity infrastructure, are also exciting.

Diversification to Minimize Risk

To reduce risks, broader diversification across asset classes and regions is recommended. Investors should diversify their portfolios away from the strong concentration on US technology stocks and also focus on other sectors and US small- and mid-caps.

Regionally, the US and UK offer a lot of potential. In Asia, Japan, Singapore, South Korea, and Indonesia are in focus. Investment-grade corporate bonds in euros and US dollars also open up interesting opportunities.

For broader diversification, additional asset classes such as commodities, real estate funds, and alternative strategies, such as trend-following or relative-value, are recommended. The recent correction in precious metal prices also offers a favorable entry point for gold and silver.

Artificial Intelligence as a Growth Driver

AI creates numerous opportunities across various industries – not just in the technology sector. The “AI investment wave” and the desire for an energy transition thus open up potential in the healthcare, energy, and other non-tech sectors.

Companies that indirectly benefit from AI investments offer attractive opportunities. Potential exists in industrial companies, media and retail companies that could achieve productivity gains and cost reductions through AI. AI also shows great potential in healthcare – for example, in drug research and diagnostics.

Longevity as a Megatrend

With increasing life expectancy, advances in diagnostics and therapy are gaining importance. Many retirees are postponing their retirement to remain productive longer. Companies that respond to these developments offer interesting investment opportunities.

Opportunities exist in selected pharmaceutical stocks, biotechnology, and medical technology. Real estate funds and REITs focused on healthcare are also attractive.

Companies focusing on health and wellness, such as those offering special foods or dietary supplements, could also benefit. Consumer goods and service providers focusing on older people are also in the spotlight.

Paul de la Baume, Investment Advisor at BNP Paribas Wealth Management Switzerland, explores in an article published in AGEFI Finance the emergence of weight-loss drugs as a promising investment theme. These treatments could revolutionize the healthcare sector and offer new opportunities for investors.

This article is a translation of an original interview published in German in NZZ am Sonntag, where Yusuf Savmaz, Head of Switzerland Domestic Market, discusses BNP Paribas’ financing capabilities, including loans over CHF 100 million and property financing.

“We are able to offer financing solutions of over 100 million Swiss francs”

NZZ am Sonntag
10.11.2024

BNP Paribas has roots in Switzerland going back 150 years and plays a leading role in the financing of public and private projects. According to Yusuf Savmaz, Head of Wealth Management for Swiss clients, the area of Lombard Loans and property financing is now also being expanded in this country.

After the turmoil of the past two years, the financing market in particular is seeking to find a new balance. Mr Savmaz, is change afoot in the Swiss banking sector?

Like other banks, we too can benefit from the fact that many clients are looking for new strategic financing partners. As a bank with many years of experience and the balance sheet required to grant large loans, our services are currently in high demand. It is fair to say that there is major change underway in the market for financing available to Wealth Management clients.

You have a facility for your clients to borrow against diversified securities portfolios as well as individual securities. Can you give an example of this?

If business owners need bridging finance for themselves or their company, we have a facility for them to borrow against the enterprise’s shares and take out a corresponding loan. It doesn’t matter whether the shares are listed or not. We have vast experience in corporate banking, which enables us to obtain a precise picture of the opportunities and risks as well as of the valuation of the company in relation to such loan requests. This in turn leads to a higher collateral value for our clients.

For this, the company or the company owner must have a corporate banking relationship with you, right?

That is correct; we always strive for long-term and strategic customer cooperation. If we know our business partners well and can scrutinise their financial situation, then we are in a position to grant loans of CHF 100 million or more, thanks to our size and the strength of our balance sheet. The market need for such loans is greater than ever. We are able to facilitate such transactions because our parent company is extremely well capitalised and the business model is broadly diversified. Moreover we have the expertise of a universal bank with global activities.

How big is BNP Paribas Wealth Management’s business in Switzerland and how much more do you want to grow here?

We only launched our Wealth Management offering targeted at clients based in Switzerland two years ago. We are currently benefiting from demand for financing from many Swiss clients. Here, too, we take a global approach – we do not offer financing on a stand-alone basis. Clients to whom we provide financing are always also BNP Paribas investment clients.

What volume of funds do you currently manage?

BNP Paribas has local operations in more than 60 countries worldwide. With global assets under management of EUR 446 billion as at the end of June 2024, BNP Paribas Wealth Management is the number one private bank in the eurozone. Moreover, within the past two years, assets under management in Switzerland have increased by more than 25 per cent, with strong growth in German-speaking Switzerland in particular.

How long has BNP Paribas had a presence in Switzerland?

BNP Paribas has been operating in Switzerland for more than 150 years. As such, it has been involved as a funding partner in many notable projects in the past, such as the construction of the Gotthard and Simplon tunnels. In Wealth Management, our core competences are the investment business and we also offer a comprehensive range of financing solutions. The property financing sector is a particularly interesting area of strong growth. In combination with BNP Paribas Corporate Banking, we have a very good value proposition and an outstanding position as a universal bank.

Do you only provide financing for property here in Switzerland or also abroad?

We provide mortgage loans both here in Switzerland and abroad. We are doing very well in German-speaking Switzerland – we continue to see rising demand in the Lake Zurich and Zug regions in particular. We have also recently again financed interesting projects at locations in Lugano and Lake Geneva. We can also structure and grant financing for foreign assets from Switzerland, which is an attractive option – and in high demand of late. This is a major advantage for our clientele, as only a few competitors in Switzerland have the relevant expertise. Providing advice and financing from Switzerland, we have recently been able to realise major projects for our clients in London, Berlin and on the French Riviera.

How should you go about financing a house or apartment abroad?

First, we recommend taking out a mortgage in the local currency. Depending on your appetite for risk and interest rate expectations, these mortgages may be either long or medium term. If you are buying a holiday home, for example, you should opt for long-term financing, so you can plan for the fixed costs that arise. In the case of private real estate, we are currently seeing a trend towards short and medium-term mortgages.

What else should you be aware of when buying property abroad?

The tax consequences and succession planning vary greatly from country to country. Inheritance tax in France, for example, is up to 45%. Apart from the issue of financing, detailed planning is highly recommended, so that you have sound advice and are on a solid footing when it comes to income and inheritance tax abroad as well.

Let’s take a look at the Swiss property market: the Swiss National Bank cut interest rates again at the end of September. What does this mean for property financing in Switzerland?

I think that demand for residential property will tend to rise again in the near future. At the moment, an apartment or house can once again be financed more cheaply with a SARON mortgage, which is based on the Swiss Average Rate Overnight. We are currently seeing an inverted interest-rate curve for fixed-rate mortgages. This means that interest rates for short-term loans are somewhat higher than in the long term. Here, too, we always take our clients’ investment business into account. By considering the individual’s or family’s overall situation, we can come up with very attractive and customised offers.

What exactly will happen on the interest rate front?

In Switzerland, we expect further interest rate cuts in mid-December 2024 and March 2025, and anticipate a key rate of between 0.5% and 0.75%. We also expect interest rates to fall in the US and the eurozone due to the trend in inflation.

On that note: what is your assessment of the inflation situation in the near future?

Inflation is falling in Europe and in the US. Despite the conflicts in the Middle East and Ukraine, we expect an inflation rate of 2.2% in the US in the first quarter of 2025. In the eurozone, inflation is likely to fall to 1.8%. In Switzerland, we expect inflation of 0.7% and 0.6% in the first and second quarters of the new year, respectively, which is within the target range set by the Swiss National Bank.

This article explores BNP Paribas Wealth Management’s forward-looking investment strategies, emphasizing resilience amid global economic challenges. Edmund Shing, CIO BNP Paribas Wealth Management, shares insights on key opportunities across sectors, the cautious integration of AI, and the unique approach needed for the Swiss market.

Published by Handelszeitung / Ringer Medien Schweiz AG

Investment strategies for the future

Wilma Fasola, Handelszeitung
07.11.2024

The aim at BNP Paribas Wealth Management is not to follow every trend but to keep a close eye on the market, and invest on that basis.

Despite the war in Ukraine, tighter financial conditions, mounting geopolitical tensions and slower growth in China, the global economy has held up very well over the past year. The reasons for this, according to Edmund Shing, PhD – Global CIO BNP Paribas Wealth Management, are that “the tightening of financial conditions of 2022/2023 is over, and conditions have improved in recent months. The European Central Bank and more recently the Federal Reserve as well have lowered key rates and, in the US in particular, economic growth has been bolstered by substantial incentives from the US government, in the form of tax credits for investment under the Chips Act and the Inflation Reduction Act.” Furthermore, the impact of the ongoing conflicts in Ukraine and the Middle East on the global economy through energy prices has been limited.

“We expect growth in the US to slow but remain positive, as the tailwind from government spending gradually abates. In Europe, growth could pick up again, as lower interest rates should stimulate industrial activity, and lower inflation rates should boost consumer confidence and spending,” says Shing. “Emerging markets vary greatly in their positioning, so it is impossible to make an overall recommendation for EM equities. BNP Paribas therefore favours cheap, faster-growing EM equity markets such as South Korea, Brazil and Turkey for various specific reasons.”

Getting the right positioning

Given the outlook for lower short and long-term interest rates coupled with a soft landing for the global economy, BNP Paribas favours asset classes such as equities (especially outside the US), investment grade credit and commodities. “This environment is more favourable for mid-cap equities and selected cyclical sectors in particular, including the S&P MidCap 400 index and financial sectors such as insurance,” says Shing. “Falling key rates have historically been positive for the price of gold, so this asset class also remains attractive to us.”

In the expert’s view, the period of inflation has not left a sizeable dent in the balance sheets of central banks, as they had generally previously made strong gains on the back of falling interest rates. “The Bank of Japan, for instance, is currently sitting on huge unrealised gains in its equity ETF portfolio,” says Shing. “The same can be said for the Swiss National Bank, regarding its US equity holdings.” Nevertheless, there is a clear risk that inflation rates both in Switzerland and Europe will generally remain below central bank targets. “This is due to deflation in the prices of goods, weaker energy prices and falling prices for services as wage growth slows. We therefore expect further rounds of synchronised rate cuts by the major central banks over the next 12 months, except for the Bank of Japan,” says Shing.

AI: caution is advised when investing

When it comes to the impact of new technologies such as artificial intelligence (AI) on investment strategies, BNP Paribas recognises the opportunities that exist. “We aim to take advantage of long-term technology shifts; for example, due to the growth of AI data centres and the resulting increase in electricity consumption. One of the best ways to invest in this theme is through the growth of US energy infrastructure; in particular, by investing in power grid infrastructure as the transmission network expands to meet this growth in demand,” says Shing, summing up the situation. Nevertheless, a cautious approach is being taken in relation to the adoption of AI and fintech as digital solutions. “While excitement is centred on generative AI and chatbots akin to ChatGPT, we see a lot of potential in more traditional AI applications in specific areas and are currently trialling a number of AI projects, both at BNP Paribas in general and specifically in Wealth Management.”

Switzerland: a unique market

When it comes to Switzerland specifically, Shing sees a strong focus on currencies, given the long-term trend of appreciation in the Swiss franc, which has diminished the performance of investments traded in foreign currencies. “In addition, we see greater acceptance of certain asset classes such as physical gold in Switzerland, which is not very highly regarded as a diversifier in a multi-asset portfolio,” he says. “In key domestic markets such as France, Belgium and Italy, we can draw on our extensive retail presence; this is a business advantage we do not have in Switzerland, which forces us to take a slightly different approach.” For this reason, BNP Paribas adapts flexibly to the specific requirements of the Swiss market, responding to its particular circumstances such as currency movements, the preference for certain asset classes and also the target group. Shing concludes by saying, “We have a very broad client base, from high-net-worth individuals to ultra-high net worth individuals and family offices. We therefore offer a very broad range of solutions, from the simplest and most liquid investment solutions to highly specialised, less liquid and sophisticated solutions. The key is to offer advice and solutions that match the client’s profile at a reasonable cost – a one-size-fits-all strategy does not work in this industry.”

This article is a translation of an original interview published in German in the Handelszeitung, featuring insights from Yusuf Savmaz, our Head of Switzerland Domestic Market. The discussion covers key strategies for optimizing retirement assets through diversified investments and tax-efficient planning.

Tax-Advantaged Transfer of Profits into Retirement Assets

Sandra Wilmeroth, Handelszeitung
24.10.2024

1e plans offer employees an opportunity to optimize their retirement savings. Entrepreneurs have more flexibility, as investment expert Yusuf Savmaz explains.

You advise clients on financial planning and retirement. Yet, many prefer to manage their finances on their own. What should they particularly pay attention to?

For those who like to handle their finances themselves, it is crucial to ensure good diversification. This is a key point because it is the only “free lunch” that markets offer, often forgotten, especially by real estate investors. They often argue that they have always had good experiences with real estate investments and feel less inclined towards other types of investments. But proper diversification protects against surprises, and good diversification includes more than just direct and indirect real estate investments.

When is a portfolio well diversified?

Much depends on the individual situation and preferences of the client. Generally, a portfolio should include investments that are low-correlated across various asset classes and, ideally, globally distributed—from stocks to bonds to commodities, with the proportions of each component individually adjusted.

Given the interest rate trend, would you currently recommend bonds for a well-diversified portfolio?

The downward trend in interest rates has just begun. With corporate and fixed-interest bonds, you can still position yourself well and benefit in the medium term from further rate cuts. Furthermore, bonds can reduce the overall risk of the portfolio and provide income through interest payments.

Do you also recommend investments in digital assets like cryptocurrencies?

For some risk-tolerant investors, it might make sense to include them in their portfolio, but at BNP Paribas, we remain cautious regarding cryptocurrencies or digitized assets due to regulatory requirements.

What about investments in Private Equity, which have become accessible to private investors through the new Eltif fund structure?

Private Equity and other private market investments are only weakly correlated with classic asset classes like stocks and bonds and can, therefore, contribute to a portfolio’s risk diversification. The lower the correlation, the better the diversification within a portfolio. It thus makes sense to invest part of the portfolio in private market investments. However, it is essential to note that these generally have a long-term and illiquid character.

Does this long-term nature make private market investments suitable for retirement planning?

Yes, that’s correct. However, the universe of private market investments is vast, with numerous providers and market-specific characteristics like limited liquidity. The topic is complex, but there are indeed some pension funds that invest in private market assets within the framework of the regulatory investment guidelines of the Occupational Pension Ordinance (BVV 2). Regulation allows up to 15% alternative investments for Swiss pension funds. Currently, the average Private Equity share of Swiss pension funds is below 2%.

Do you also consider how a client’s pension fund assets are diversified in individual financial planning?

It makes a lot of sense to consider pension fund assets, which typically invest about one-third in stocks, as well as employee plans for executives and entrepreneurs in investment advice.

In what way?

Suppose a person has accumulated two million Swiss francs in their pension fund, with 30% invested in stocks and the rest in bonds and other assets. If this person has a greater appetite for risk and higher risk capacity, for example, because they are young and still have plenty of time until retirement, they would need to invest at least 1.4 million in stocks to achieve a balanced portfolio of 50-50.

What alternatives are there?

In such cases, one could use 1e plans for supplementary pension plans. Here, individualized investment solutions can be pursued according to the respective risk profile, and insured persons can select the investment strategy based on their specific preferences and profile. Insured persons with longer time horizons can choose a higher equity share according to their higher risk tolerance, which can lead to higher returns and, consequently, a larger retirement fund over the long term.

But doesn’t this also involve risks?

Yes, if the markets correct, the return can also turn negative. Often, this happens during economically challenging times. And if the employment relationship ends or a job change is imminent at the same time, the retirement assets in the 1e plan would have to be realized at an unfavorable moment, potentially resulting in losses.

What makes purchases into the pension fund so attractive?

Purchases into retirement assets can be deducted from taxable income, providing a tax saving that would otherwise have to be generated in private wealth. For instance, if a person—assuming a corresponding pension gap exists—deposits 500,000 into the pension fund, they could save 150,000 Swiss francs in income tax with an assumed marginal tax rate of 30%. Without this one-time payment, those 150,000 would have to be earned in the financial markets. Over time, one can use the effect of voluntary payments multiple times until the pension gap is closed.

But won’t taxes apply upon withdrawal?

That’s correct, but it will be taxed separately from other income and at a favorable rate. Staggered withdrawals can further optimize the tax component. To make a partial withdrawal, the workload must be reduced by at least 30%.

What flexibility do entrepreneurs have in planning their retirement?

An entrepreneur can influence their salary level. If they are also the principal shareholder and the business is thriving, they can raise their insured salary, creating pension gaps that can be filled with voluntary payments, thus transferring business profits into the entrepreneur’s retirement assets in a tax-optimized way. There are good options for tax optimization, but it is essential to have good advice to avoid any assumption of tax evasion. Retirement planning is certainly something to examine closely, especially if you have more flexibility as an entrepreneur.

When should one start planning business succession?

As an entrepreneur, the process of retirement planning, especially business succession, should begin early. Ideally, ten years before the desired retirement date, one should consider the future of the business—whether it will be taken over by family, taken on by management, or sold as the best solution.

Find more details in an interview with Beat Bachmann, CEO of BNP Paribas Wealth Management Switzerland & Emerging Markets, and Caroline Gibault, Head of Offering, Products & Services for BNP Paribas Wealth Management Switzerland.