By Adam Cadle
The financing situation of Swiss pension institutions in Q1 2012 has shown signs of improvement due to growth in stock markets, with the Credit Suisse Pension Fund Index also experiencing positive returns.
According to the Swisscanto Pension Funds Monitor, the average asset-weighted coverage of all pension institutions surveyed grew from 97% to 98.8%. Concerning private-law pension funds, the estimated asset-weighted cover ratio increased by 1.9 percentage points to 105%.
An increase in the cover ratio was also experienced in public-law pension funds, with a rise of 1.8 percentage points to 89.9%.
Swisscanto chief economist Thomas Liebi said: "Swiss pension funds like most institutional investors internationally are currently experiencing a squeeze of low market yields on one side and the obligation to deliver the expected returns to the beneficiaries on the other side. Due to low coverage ratios many pension funds are still not capable to take on more risk in order to achieve the necessary returns.
"The encouraging growth in the stock market has therefore brought some welcome relief to the financing situation of Swiss pension insitutions."
The Credit Suisse Pension Fund Index rose by 3.08% as of March 31 2012 to 128.47 driven by increases in foreign equities (1.21%), Swiss equities (0.83%), real estate (0.45%), Swiss bonds (0.29%) and liquidity (0.18%).
Credit Suisse also revealed that the BVG mandatory minimum rate of return added 0.37% to climb to 139.97 points during the first quarter.