SWITZERLAND - Aargauische Pensionskasse (APK) has made first foray into infrastructure and created a long/short equities portfolio, to further diversify its CHF7.6bn (€4.7bn) portfolio.
An already well-diversified portfolio - including hedge fund and commodity investments - helped APK, a public fund for the canton of Aargau, achieve a 4.2% return for 2007, according to its annual report .
To "maximise the return-risk-ratio in the portfolio" the fund has now decreased its exposure to traditional long-only equities and has put CHF500m, or 6% of the total assets, into hedge fund of fund solutions.
"As an addition to our equity exposure these investments help to decrease volatility but still generate a high return," Robert Scholl, CIO of the APK, explained to IPE.
"The new investments were finalised in the first quarter of 2008. We invest in regions including Europe, Asia-Pacific and emerging markets."
Last year also saw the fund's first foray into infrastructure projects worldwide with an initial investment of CHF63m.
The fund also considerably increased its exposure to hedge funds and commodities, the two asset asses which had helped the fund's performance most last year returning 11.5% and 5.7% respectively.
The fund held CHF572m in hedge funds at the end of last year compared to CHF399.2m the year before and CHF607.3bn in commodities compared to CHF263.5bn in 2006.
"Further investements into alternative assets are not planned at the moment, also not into other asset classes," Scholl noted.
Money for these new investments came mainly from the CHF1.7bn one-off financial injection the canton had to pay into the fund to bring it from a 74% funding level to fully-funded status at the beginning of 2008, to prepare for the fund's switch from DB to DC. (See earlier IPE story: Aargau to pay CHF1.7bn into pension)
Following the announced change from defined benefit to defined contribution - which contained details of a loss of the state guarantee as well as some administrative changes - 33 muncipalities decided to leave the APK and joined other Pensionskassen.
However, as the APK has now disclosed in its annual report most of the employers who left the fund had less than 30 employees which means the total number of members in the fund only decreased by 5% as a result of these exits.
Overall membership increased over the last year by 1% to 26,095.