The intelligent VIAC system continuously monitors each individual portfolio. As a result of this ongoing monitoring, rebalancing takes place on a monthly basis. In the rebalancing, every portfolio is reallocated to the target allocation of the defined strategy. The following simplified example illustrates this:
Max invests CHF 100 at VIAC and decides on a strategy with 50% shares and 50% cash. Let’s assume that the stock market gained 10% a month later and the interest income on the cash portion is negligibly small. Max now has 55 CHF in shares and 50 CHF in his 3a account. However, the distribution is now 52.4% of shares (55 out of a total of CHF 105) and 47.6% cash (50 out of a total of CHF 105), which is no longer in line with his original strategy.
Rebalancing takes place on the first trading day of each month to correct this discrepancy. The system checks whether the current weighting deviates by at least 2% from the target weighting. If the deviation is 2% or more for a single investment instrument or aggregated over an entire asset class, trading orders are automatically generated. Once they have been executed, the target values of the strategy are restored. In the case of Max in the above example, the deviation is 2.4%. The VIAC system would therefore sell shares so that its assets would again be in line with the defined strategy of 50% shares and 50% cash.
The example also shows that price gains can be made through automatism (a part of the shares are sold at a higher price). Conversely, in the event of price losses, shares can be bought at a lower price.
The fact that each client pays an administration fee (0.52% per annum on the invested portion of the pension assets) means that no additional transaction fees are incurred despite this ongoing and close monitoring. Max only pays around CHF 0.26 (0.52% to approximately CHF 50 invested in shares) per year and would benefit from up to 12 transactions in this simplified example. In actual implementation, there can be over 100 transactions per year.