SWITZERLAND - The CHF10bn (€8bn) Pensionskasse for the Swiss city of Basel (PKBS) is close to a 100% funding level again thanks to state aid and the strong performance of bonds, equities and real estate in 2010.

The fund had received CHF800m in state aid last year, much less than initially planned, but a 4.1% return helped propel the fund toward full funding.

The performance was well above the industry average of 2.9% for last year, as calculated by Credit Suisse.

And this year, in the first three months, the PKBS is also slightly ahead of the market at 0.7%.

The funding level of the city's public scheme improved from 91.1% to 99.5%, with the portfolio of the city itself being slightly above the 100% mark and the portfolios of associate members - such as public authorities - at 95.5% on average.

The fund noted that the funding boost was mainly due to the financial aid received by the state for its portfolio, half of which will be paid back by members over the next 12 years with lower interest and non-indexation of pensions.

Some of the other member authorities, which have joined the PKBS over the last years, have also chosen to recover their funds, while others are still waiting for market developments.

A "balanced asset allocation and timely currency hedging" fuelled the strong investment performance, the scheme said.

Because of the financial aid, the fund currently has a high liquidity quota of 15.2%, which will be reduced in the course of this year according to its strategic asset allocation.

The fund is currently slightly underweight real estate - both domestic (15.2% compared with 17% in the SAA) and foreign (2% compared with 3% in the SAA).

As at year-end 2010, the fund was also invested in bonds (30.5%), domestic equities (12.2%), foreign equities (17.1%), mortgages (6.6%) and commodities (1.2%)