The BVV2 Guidelines for foundations and pension funds came into force on January 1, 2015. Whilst that 15% limit doesn’t change, there are important amendments, including in the definition of “Alternative Debt.” The changes made necessitated pension funds and investment foundation to adjust their asset investments by the end of 2014.

The changes have been made in consultation with the OAK (responsible superintendence). There is also an official commentary which provides a detailed analysis of the new regulation. – “BSV – Mitteilung über berufliche Vorsorge ,Nr. 138.” Official versions are only available in German and French. Funds-Axis has prepared an unofficial English translation.

The key revisions are at Article 53 Par. 1 lit. b and Article 53 Par. 3 of the investment regulations, defining eligible and alternative debt instruments.

Art.53 Par. 1 lit. b, the definition of debt has been tightened with the effect that many previously conventional debt instruments are now classified as alternative debt.

Paragraph 3 specifies which claims, not listed in Paragraph 1, point b, which count as alternative investments.

The matter is made more complicated by the fact that according to Art. 53 Par. 1 Bst. b.9, some alternative debt instruments can be classified as non-alternative if they are contained in a “common, widespread and well diversified” index which is also used as benchmark for the fund.

In summary we have then the following breakdown:

Where a fund invests into another fixed income fund, that target collective investment scheme is to be treated as “alternative debt” where it has investment in alternative debt.

According to the interpretation in “BSV – Mitteilung über berufliche Vorsorge Nr. 138”, a collective investment that contains alternative debt which qualifies as non-alternative debt due to its alignment with an index, can be treated as non-alternative debt in terms of Art. 53 Abs. 1 Bst.