A conversation about contributions in kind as a strategic tool for pension funds with Christoph D. Jockers, Chief Investment Officer (Akara Fund) at Swiss Prime Site Solutions, Willy Guntern, Managing Director of Ascaro Pension Fund and Marlene Zingg, Head of Real Estate at Ascaro Pension Fund.
The Swiss real estate market is in the midst of a structural change. Many pension funds are facing increasing regulatory requirements, growing sustainability pressure and ageing investment properties. At the same time, expectations for stable, predictable returns remain high. In this challenging environment, contributions in kind are becoming increasingly important for pension funds – as a strategic tool for realigning property portfolios without losing their allocation.
«Many pension funds are faced with the reality that their investment properties are getting older – at the same time, the requirements in terms of sustainability, regulation and professional asset management are increasing enormously», explains Christoph Jockers of Swiss Prime Site Solutions. «Contributions in kind offer a structured way to solve these challenges without abandoning the real estate allocation and without the reallocation risk of a traditional sale.»
From direct ownership to strategic partnership
Essentially, a contribution in kind means changing from direct to indirect ownership of real estate. Instead of selling a property, it becomes part of a professionally managed investment vehicle. «You don’t sell the property, you put it in a single vehicle», says Jockers. «You remain invested – but are more broadly diversified, without the operational risks associated with direct ownership.»
This approach opens up new opportunities for institutional investors in particular. Risks are reduced and economies of scale are exploited, while maintaining the strategic real estate allocation. «The biggest benefit is the reallocation of concentrated risk into a diversified portfolio – without disrupting the real estate allocation», emphasises Jockers.
Practical perspective: why Ascaro opted for a contribution in kind
The Ascaro Pension Fund shows how these considerations work in practice. The catalyst was a structural challenge in the company’s own portfolio: «Around 20 percent of our assets were in Western Switzerland. Despite external management, the organisation remained challenging – due in particular to issues relating to tenancy law and regional peculiarities», says Willy Guntern.
The increasing coordination effort and the requirements for future renovations led to various strategic options being examined. «Since our primary goal was not to reduce the real estate allocation, it made sense to examine the possibility of a contribution in kind in greater depth», Guntern continues.
In the course of the process, it also became clear to Marlene Zingg that this approach offers decisive advantages: «During the transaction process, the contribution-in-kind option became more and more prominent. Although we wanted to withdraw from the region, we were able to remain invested indirectly while at the same time relinquishing the operational challenges.»
«Instead of selling a property, it becomes part of a professionally managed investment vehicle.»
More than just a transaction: a long-term perspective
A key difference to traditional sales is the long-term focus. While a sale is primarily about price and transaction security, a contribution in kind is a collaborative partnership.
«You want to be sure about who you’re ‘marrying’», says Zingg in a nutshell. The evaluation process was correspondingly thorough: «We took a very close look at the various vehicles – from the size of the fund to the dividend policy and the sustainability expertise. It has to fit into the Ascaro DNA.» Guntern also stresses the importance of a clear list of criteria: «Every pension fund needs to start by asking itself which parameters are crucial. This determines which partner is the right one.»
Reduction of workload and focus on core tasks
With the implementation of the contribution in kind, one thing in particular changed for Ascaro: the focus. Operational responsibility for the sub-portfolio in Western Switzerland was handed over, while the economic investment was retained. «By outsourcing, we were able to delegate management and renovation tasks», explains Zingg. «Our office can now focus more on the development of the remaining direct properties.»
Financial expectations were also met, and in some cases even exceeded: «After more than two years, we can say that our expectations have been met», Guntern concludes. «We are confident that the decision taken at the time would still be the right one today.»
Diversification, economies of scale and sustainability
A key driver for contributions in kind is the increasing importance of diversification and professional asset management. «Many pension funds are regionally concentrated and limited to a few types of use», says Jockers. «Through an indirect real estate investment vehicle, they gain access to a broadly diversified portfolio – combined with expertise in development, financing and sustainability.»
ESG issues in particular are playing an increasingly important role here. Renovations, decarbonisation and long-term value retention require specialist expertise and significant investments. «A larger portfolio means more bargaining power and lower costs along the entire value chain», says Jockers.
Responsibility towards tenants
In addition to economic aspects, there is also a greater focus on social responsibility. Many properties have a long history within a pension fund – often with a direct connection to the insured persons. «We have a fiduciary role with regard to our beneficiaries», emphasises Guntern. «This also includes constantly reviewing and optimising the way we deal with our properties and tenants.»
For Swiss Prime Site Solutions, this responsibility is key. «A contribution in kind isn’t just about balance sheets», says Jockers. «Our mission is to guarantee continuity – so tenants don’t experience any disruption in their day-to-day lives.»
Cooperation as a success factor
The success of a contribution in kind depends largely on the cooperation of all parties involved. «The process was open and transparent from the start», recalls Jockers. «That’s crucial, because this is not a one-off transaction, but a long-term partnership.»
The structured process was also seen as a key success factor at Ascaro. «It is important that you set the right framework conditions from the outset and that everyone involved knows what their role is», says Guntern. Zingg adds: «It was an intensive process, but also a great learning experience. All the components had to work in harmony – and that’s exactly what has proven its worth.»
«It’s not just about a transaction – it’s about finding the right partner.»
Who stands to benefit most from contributions in kind
Contributions in kind are of particular interest to small and medium-sized pension funds, which have to meet significant demands with limited resources. «Especially when renovation cycles or ESG adjustments are on the horizon, the workload can quickly reach its limits», explains Jockers. «Contributions in kind are the perfect way to solve these challenges.» But it can also make strategic sense for larger investors – for example to professionalise their real estate allocation or to achieve targeted diversification.
Contributions in kind are gaining in importance
Contributions in kind are increasingly becoming a key tool in the strategic real estate management of pension funds. They combine the best of both worlds: the stability of real estate investments with the efficiency and scalability of professional investment structures.
Or, as Marlene Zingg puts it: «It’s not just about a transaction – it’s about finding the right partner. And when the fit is right, it creates lasting added value for everyone involved.»
About the Ascaro Pension Fund
The Ascaro Pension Fund is an independent, fully autonomous collective occupational pension organisation based in Bern. Since its foundation in 1942, it has offered comprehensive pension solutions, particularly for small and medium-sized enterprises (SMEs) in Switzerland and their employees. Today, the fund supports around 90 affiliated companies and several thousand insured persons and pension recipients. With non-current assets of over CHF 1.3 billion and a solid coverage ratio of over 113 percent, Ascaro has a stable financial base. Its investment strategy is long-term in nature and broadly diversified. Real estate has traditionally played a key role in this and makes a significant contribution to the stability of returns. Overall, the fund’s aim is to manage the pension assets of its insured persons sustainably, efficiently and responsibly.
Have we piqued your interest?
Swiss Prime Site Solutions (SPSS) allows contributions in kind in various investment vehicles, tailored to the needs of pension funds and the strategic focus of the properties held.
Akara Swiss Diversity Property Fund PK (ADPK)
The Akara Swiss Diversity Property Fund PK focuses on a broadly diversified property portfolio in Switzerland. This may include residential and commercial properties that are in line with the strategy and are geared towards stable long-term returns, quality and sustainability.
Further information on the ADPK can be found here
Fundamenta Group Investment Foundation (FGIF)
The Swiss Real Estate investment group targets pension funds with an existing direct portfolio of residential and mixed-use properties in Switzerland. Contributions in kind are an integral part of the supply and enable a seamless asset swap from directly to indirectly held real estate.
Further information on the FGIF can be found here
Fundamenta Real Estate AG (FRE)
FRE is also able to assess structured share deal or contribution-in-kind transactions. In this context, shares in real estate companies or participations can be contributed in exchange for shares, cash or a combination of both. For owners, this offers the opportunity to efficiently transfer indirectly held real estate or real estate interests into a listed indirect real estate investment, subject to legal, tax and valuation due diligence on a case-by-case basis.
Further information on the FRE can be found here
Swiss Prime Investment Foundation
With investment groups such as Swiss Prime Anlagestiftung and SPA Living+ Europe, it offers a wide range of options for contributions in kind to Swiss real estate and – on a selective basis – to European residential properties. The focus is on high-quality existing properties and broad diversification.
Further information on the Swiss Prime Investment Foundation can be found here
Swiss Prime Site Solutions Investment Fund Commercial (SPSS IFC)
The Swiss Prime Site Solutions Investment Fund Commercial, which is listed on the stock exchange, offers qualified investors the opportunity to contribute commercial real estate in line with the strategy as contributions in kind. The focus is on high-quality office, retail and logistics properties in established Swiss locations.
Further information on the IFC can be found here