Swiss pension funds are sticking to gold investments as the asset class stabilises investment portfolios, hedging risks, and faring well in uncertain times with a looming global trade war and persisting geopolitical tensions.
Swiss schemes usually hold between 3% and 5% of total assets under management in gold, according to consultancy Complementa. The average asset allocation of Swiss pension funds to gold has stayed close to 1% for the last few years, according to the latest risk check-up study published by the consultancy.
“Pension funds that are already invested tend to keep their gold allocations. We have not seen a big move into the asset class by pension funds that did not have an allocation in the last two years,” said Andreas Rothacher, senior investment consultant at Complementa.
Swiss schemes tend to hold gold for its diversification benefits.
“Tail hedging is also cited sometimes – this might become more relevant with de-dollarisation and rising government debt levels,” added Oliver Gmuender, head of relationship management at Complementa.
Inflation protection is also cited by the schemes sometimes as a reason for investing in gold, but seems less relevant in Switzerland compared with other countries because of its low inflation rate.
“Return considerations seem [at least in the past] less relevant – or were not the main motivation to add gold to a portfolio/asset allocation,” Gmuender said.
Returns matter
Publica invests around 3% of its CHF42.5bn (€45.2bn) of total assets in gold, with 80% of that allocation held in physical gold bars, and 20% via excess return swaps, said chief investment officer Stefan Beiner.
Publica holds gold for diversification reasons, to hedge risks, especially in times of geopolitical crisis, and for partial inflation protection as, in the long term, gold shows high sensitivity to inflation, the CIO explained.
“Moreover [in terms of] liquidity, gold can be traded even in extreme market phases, for example during the COVID-19 crisis in March 2020, when even US government bonds were difficult to trade for a short time,” Beiner said.
Publica expects returns from gold to be around the rate of inflation in the long term.
The scheme’s gold portfolio returned 33% in Swiss francs in 2024, contributing about one percentage point to 5.9% net return last year. In January this year, the return from investments in gold was just under 8% Swiss francs, Beiner added.
In 2020, Migros Pensionskasse conducted an asset/liability management (ALM) study showing that adding gold to its portfolio had a diversifying effect and improved the overall return/risk profile. At that time, the scheme had a target allocation to gold of 2% of total assets.
Inflation subsequently rose and the allocation to gold bore fruit. The scheme therefore decided to slightly increase its target allocation to 3% of its total CHF29bn assets.
Gold is currently experiencing high demand, and freezing the assets of the Russian central bank after the war against Ukraine has set a precedent, said Christoph Ryter, chief executive officer of the Migros scheme.
“Central banks in emerging markets in particular have begun to diversify more, and are now also buying more gold. This led, among other things, to a strong performance of 36.9% in Swiss francs in 2024. The year 2025 also started well with 7.5% [performance] in January,” Ryter added.
PKBS, the Pensionskasse of the city of Basel, and Compenswiss also aim for a 3% allocation to gold.
A 5% allocation to the asset class, funded from a mix of fixed income and equities, helps to reduce the reserve requirement of Swiss pension funds to pay pension promises from 14.8% to 13.8%, while the expected return remains broadly flat, according to a study conducted by the World Gold Council.
Risks on the horizon
The US economy has remained strong and the new administration’s rhetoric promising further economic policy reforms, including slashing red tape and cutting taxes, is adding to the optimism, suggesting that American exceptionalism could persist for the foreseeable future.
“But such extremes in optimism are rarely achieved, and an important question for investors is whether the economy and profits will meet current investor expectations given what is priced in across financial assets or will asset prices need to correct?” said Jeremy De Pessemier, asset allocation strategist at the World Gold Council.
Inflation has cooled down but remains sticky and above central banks’ targets in several jurisdictions, he said, adding: “If inflationary pressures were to resurface, this will have implications for the extent of central bank rate cuts [or hikes] over the coming year.”
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