Closing the Pension Gap
An Asset Allocation Framework for High Net Worth Women
Do you have a gap to close?
This question may resonate more deeply with women than they would care to admit. It's the pension gap, not just any gap. You may be experiencing this as well, particularly if you have experienced salary disparities, taken time off work to care for family members, or have just lived a longer life.
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The gender pension gap in Switzerland and the EU is real
Recent data indicates that the average pension gap in the EU is roughly 25%. In Switzerland, women receive almost one-third less in pensions than males, which makes the situation even more startling. Swiss women receive an average pension of CHF 36,000 annually, whilst males receive a more comfortable CHF 55,000.
Because more women than men work in lower-paying industries, on average, women accumulate fewer pension entitlements during their working lives. In addition, there are fewer women in senior roles, more women work part-time, and women take longer and more frequent breaks from work to take care of family members.
But here’s the thing: I’m not just acknowledging the gap—I’m actively working to close it. By being intentional about how I invest my savings, I’m taking control of my financial future. And I want to share a strategy that has helped me and could help other high-net-worth women secure their retirement.
Understanding the Three-Pillar Asset Allocation Framework
Effectively addressing the pension gap requires a well-thought-out investing strategy, particularly for high-net-worth women. My approach to asset allocation is a three-part framework that fits with my long-term financial objectives. Let us examine each pillar in more detail:
1. Longevity Sleeve: The Traditional 60/40 Portfolio
The longevity sleeve is the foundation of a stable financial future. The conventional 60/40 portfolio plan, which has 60% equities and 40% bonds, is the foundation of this pillar. This balance provides the growth potential needed to outpace inflation and the stability required during market downturns.
Why a 60/40 Portfolio?
Equities: These are your growth engines, helping to increase your wealth over time. They are essential for long-term financial health.
Bonds: These offer stability, acting as a cushion against the volatility of equities. They provide a steady income stream and reduce overall portfolio risk.
This blend is a cornerstone for anyone looking to grow their wealth while managing risk.
2. Real Economy Investments: Contributing to Economic Growth
The second pillar is all about putting your money into the real economy. This includes tangible assets like real estate, infrastructure, and private equity—investments that contribute directly to economic growth.
Benefits of Real Economy Investments:
Real Estate: Provides rental income and appreciates over time, making it a reliable source of wealth.
Infrastructure: Long-term projects like highways and utilities can offer stable, predictable returns.
Private Equity: Investing in start-ups and businesses can lead to significant returns and further diversification.
These investments are less volatile than stocks and serve as a hedge against inflation, helping to stabilize your portfolio in uncertain times.
3. Diversifying Sleeve: Incorporating Decorrelated Strategies
The final pillar involves diversifying your portfolio with decorrelated strategies. These are investments that don’t follow the same market trends as your other assets, reducing overall risk.
Examples of Decorrelated Strategies:
Hedge Funds: Utilize a variety of strategies to achieve returns independent of the stock market.
Commodities: Investing in physical goods like gold can protect your portfolio from market volatility and inflation.
Alternative Investments: This includes assets like art or wine, which often have little correlation with traditional markets.
This diversification ensures your portfolio can weather different market conditions.
Taking Action to Close the Pension Gap
For high-net-worth women, implementing this three-pillar framework requires a proactive approach:
Assessment: Start by evaluating your current financial status, risk tolerance, and long-term goals.
Allocation: Determine how much of your portfolio to allocate to each of the three pillars.
Monitoring: Regularly review and adjust your portfolio to stay aligned with your goals and changing market conditions.
The pension gap is real, but it doesn’t have to define your financial future. By adopting a strategic approach to investing, you can close the gap and ensure a secure, comfortable retirement. The three-part asset allocation framework—comprising a longevity sleeve, real economy investments, and a diversifying sleeve—offers a robust strategy to achieve your financial goals. Remember, investing with purpose isn’t just about securing your future; it’s about empowering yourself to bridge the pension gap effectively.
If you know, you know.
Have a great week ahead
Maryann
Disclaimer
The content in this newsletter is for informational purposes only and does not constitute financial, investment, legal, or medical advice. Opinions expressed are those of the author and may not reflect the views of affiliated organisations. Readers should seek professional advice tailored to their individual circumstances before making decisions. Investing involves risk, including potential loss of principal. Past performance does not guarantee future results.