Switzerland’s Publica has praised returns from its corporate bond and equity portfolios, while noting that its approach to hedging held back performance in 2014.

The public pension fund, with assets of CHF37.7bn (€31.3bn) at the end of December, said as it published its annual report that overall returns would have been 8.9% last year rather than 5.9%, had it not fully hedged its currency exposure.

It defended its hedging approach earlier this year after the Swiss National Bank (SNB) ended the franc’s peg to the euro, a move that would have led to significant losses had it not been for the hedge.

Falling oil price also hit Publica, with the fund saying the nearly 29% decline in crude oil prices led to a loss of 1.1% in 2014. The loss was despite only 2% of the fund’s portfolio being invested in commodities – comprising crude oil, petrol and heating oil.

Real estate significantly improved its performance compared to 2013, returning 3.75%, up from 0.25% the year prior.

Corporate bonds boosted the scheme’s asset value by 6.8%, aided by the book value increase due to low interest rates, while nearly all equity markets saw positive returns.

Across all of Publica’s 21 pension funds, the average coverage ratio rose 1.2 percentage points to 105.3%, with none of the schemes underfunded. 

The fund was until recently shielded from the SNB’s negative deposit charges, a decision overturned after public backlash

The number of active members across all scheme members rose by 2.6% to 62,500, and pensioners fell by 3.3%.

For more on Publica’s investment strategy, read IPE’s interview with deputy CIO Patrick Uelfeti