SWITZERLAND - BLVK, the CHF5bn (€3.05bn) pension fund for teachers in Berne, says a good performance of its investments enabled it to post an above-average return for the year and further close its funding deficit.
In its latest business report, BLVK said its investments returned 6.9% last year, or 0.3% above the average for Swiss pension funds.
"By means of small shifts between asset classes as well as the inclusion of emerging market equities a good return was achieved," the fund said.
At the end of 2006, BLVK had 25% of its assets invested in equities, including 15% foreign and 10% domestic. Allocations to fixed income were almost 40%, including 27.3% denominated in Swiss francs and 12.4% in foreign currency.
The scheme also had 14% invested in real estate, 6.5% in convertible bonds and 3% in alternatives. Cash and mortgage made loans made up the rest of its assets.
BLVK also said its funding ratio further improved to 89.6% of liabilities in 2006 from 86.4% in 2005. In cash terms, BLVK's funding deficit declined to CHF580.4m last year from CHF735.6m a year before.
BLVK was fully funded in 2000, but at the same time overexposed to equities. In the equity crash that ensued, BLVK's funding ratio fell as low as 79% in 2003.
Thanks to an implicit government guarantee, however, BLVK is protected against insolvency. Nonetheless, the sharp drop in the fund's funding ratio prompted an investigation by a Swiss parliamentary committee.
In August 2005, the committee issued a report that placed most of the blame for BLVK's overexposure to equities on a former director, Hans-Peter Sieber.
But the report also said Aon Chuard, the scheme's former investment consultant, shared some of the blame. Aon Chuard has angrily dismissed the finding, saying that responsibility for BLVK's investment strategy ultimately rested with the fund itself.
While the committee urged BLVK to take legal action against those it said were responsible for the fund's financial woes, the scheme's management decided against this course of action in May 2006.
BLVK insures teachers and other educational staff in and around the Swiss capital. It has around 15,380 contributing members and 7,450 pensioners.