18/05/2011
By Laura Blows
The average fund performance for Swiss pension funds was just 2.95%, compared to 10.3% in 2009, Swisscanto has revealed. This relatively poor performance was attributed to historically low interest rates and losses on investments in USD and EUR.
In its survey of Swiss pension funds, over 40% reported a yield of below 2.5%, while 49% had a yield of between 2.5% and 5%. The report had 361 participants and the institutions surveyed had total assets of CHF426 billion.
The report found cover ratios in 2010 increased by just under one percentage point each to 91% for public funds and 106% for private funds - still below the 115% target for pension funds without a state guarantee.
According to Swisscanto, the majority of pension institutions therefore do not have sufficient ability to cope with risks for equity investments and other asset categories which are subject to greater fluctuations in price.
Around a third of funds also reported that their investment strategy had been adjusted in 2010. In particular there had been increases in target quotas for foreign equities and Swiss real estate, which formed just under 20% of pension assets. 82% of the pension funds participating stated that they have indirect real estate investments, while 63% possess real estate directly.
Nearly half of the funds decided to reduce Swiss bonds and one third opted to increase alternative investments, suggesting that under the prevailing, difficult market conditions and the persistently high yield requirements, pension funds are being compelled to switch over to riskier investments.
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