Which is better for Pillar 3a, ETFs or index funds?
There is no generally valid answer. The advantage of Swiss index funds is that they are exempt from Swiss stamp duty. One advantage of ETFs is their tradability on the stock exchange, but also the fact that they are also very widespread outside Switzerland and are therefore very cost-efficient.
For this reason, we use index funds for some important asset classes in Pillar 3a. However, stamp duties are only one factor among others to consider. Equally important are the ongoing costs (TER) and the bid/ask spreads of the ETFs or, in the case of index funds, the issuance and redemption premiums.
In addition, for maximum flexibility in the individualisation of the investment strategy, we round off our investment universe with a large selection of ETFs in Pillar 3a as well, since the range of index funds is limited compared to ETFs for certain asset classes. It should also be noted that, unlike the TER, stamp duty is not an ongoing cost factor – it is only incurred on purchases and sales.
Sometimes it is also erroneously argued that index funds do not incur bid/ask spreads. However, this is a mistake, because professional index funds apply an issue or redemption surcharge for each trade in order to protect the existing investors in the index fund from the trading costs incurred. In the respective factsheets of the index funds, these are listed under the term «issue spread» or «redemption spread» or similar and are often comparable with the bid/ask spreads of ETFs.