Switzerland’s CHF15.8bn (€14.7bn) pension fund for postal employees has joined several of its compatriot Pensionskassen in the mortgage lending business in a bid to obtain more yield.
It described mortgages as an “interesting alternative to bonds”.
Andres Haueter, head of investment management at Pensionskasse Post (PK Post), said: “The yield is significantly higher than traditional investments and risk is limited because of the claim on the property.”
The pension fund is targeting mortgage lending volume of around CHF500m over the coming years, a relatively small proportion of its total portfolio, according to a spokesperson.
The Pensionskasse is offering mortgages to scheme members and third parties. It is the first time that PK Post has invested in mortgage lending as an independent entity.
It has mandated a fintech company called finovo with handling the loan business, the third pension institution to do so. On the same day that PK Post announced its decision, the Pensionskasse for the city of St Gallen said that it was expanding its mortgage business to third parties and had hired finovo.
Not all Swiss pension funds in the mortgage lending business offer loans to non-members.
PK Post’s move comes as Swiss pension funds have shown renewed interest in mortgage lending amid the low yield environment. They were once active in this area, but many abandoned the market several years ago.
According to Credit Suisse’s Swiss pension fund index, the typical Swiss pension fund had a 2.12% allocation to mortgages in the second quarter of 2017, up 11 basis points from the third quarter of 2015.
Dutch pension funds have also become more active in their domestic mortgage lending market, alongside insurance companies. The European Central Bank has highlighted this trend, seeing it as partly driven by a search for yield and changes in regulatory frameworks. It has highlighted the development as a potential concern from a financial stability perspective, but said it remained to be seen whether the role of insurance companies and pension funds in lending to householders would continue to grow.
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