SWITZERLAND - Aargauische Pensionskasse (APK), a CHF6bn (€3.7bn) pension fund for civil servants in the northern canton of Aargau, has posted an an above-average return for 2006 and said that it will open its doors to extra-cantonal employers.
APK's return on assets for 2006 totalled 7.3% - or 0.6% above the average for other Swiss schemes, known as Pensionskassen.
The fund said the above-average return was in large part due to a strong performance of its equity investments (16.6%) and its hedge funds (8.9%).
APK currently invests 31.6% to equities, 25.5% to fixed income and 11.5% to real estate. Alternatives exposure is 12.9%, split almost evenly between hedge fund and commodities.
"The good result meant that we were able to raise assets by CHF400m last year and maintain our reserves for market fluctuations," said Martin Sacher, APK's chief executive. Those reserves equal 15% of assets.
The result also meant that APK improved its funding ratio by 1.4% to 77.3% of liabilities. APK's funding ratio is one of the lowest known for Swiss Pensionskassen, public or private.
Overexposure to equities during the crash earlier this century forced APK into deficit, which expressed in currency, totals CHF1.5bn.
The 200-odd public sector employers that back APK plan to fully fund the scheme from January 1, 2008 in exchange for its implementing several reforms. These include switching from defined benefit to defined contribution, raising the retirement age to 65 and requiring 40 years of contributions to the fund for a maximum benefit.
The bailout will also be partially financed by APK selling assets.
Still, the city of Zofingen in the canton plans to quit the APK by the end of 2007 to avoid contributing CHF10m toward fully funding the Pensionskasse. The city is to decide which other scheme it will switch to in June.
On the other hand, APK managing director Susanne Jäger said the reforms to the scheme would permit it to open itself up to other employers. Speaking at a news conference, Jäger said APK would target local authorities that use other public Pensionskassen.
APK currently insures around 26,000 civil servants and teachers in the canton. Its pensioners number around 7,700.