SWITZERLAND - The Swiss first pillar fund AHV recovered from a financial deficit in 2008 to a surplus in 2009, posting a return of 11.5% ahead of its planned separation into three discrete entities.

The double digit total return last year enabled the CHF42.3bn (€29.7bn) Swiss Federal Social Security Fund to report a surplus of CHF3.9bn for 2009 after a deficit of CHF2.3bn in 2008.

"The positive result is partly down to the improved situation on the financial markets," AHV stated.

But the disability insurance (IV) fund, which AHV is preparing to separate out into a separate entity, reported a deficit of CHF1.1bn for 2009.

AHV will put aside capital to fill the deficit and the fund's annual report showed it had continued with a risk-reducing investment strategy last year, which had first been put in place in 2008.

While the long-term equity exposure is set to 30% the current asset allocation only sees 15% of the portfolio invested in equities with the balance having been shifted to bonds.

A new three-way system will introduced at the start of 2011, comprising the old age pension fund (expected to be roughly CHF18bn in size), the IV fund (CHF5bn), and the military and maternity fund (CHF500m). (See earlier IPE-story:  Swiss AHV reviews asset allocation ahead of split)