Risk not rewarded in the medium-term
SWITZERLAND - Risk in Pensionskassen portfolios has not been rewarded over a longer period, Credit Suisse has claimed, while State Street has calculated pensionskassen saw an average 2008 return of -16.83%.
The detailed analysis of Credit Suisse’s latest research for its Pensionskassenindex has shown the vehicles saw an overall loss of 13.25% in 2008. (See earlier IPE story: Swiss funds hit historic returns low)
The data shows “for the first time” over a five-year period higher risk was not rewarded by higher returns over the medium-term.
“As a positive quarter (Q4 2003 with a performance of almost + 2%) was replaced by a very negative quarter (Q4 2008 with -6.8%), the regressive slope is negative,” Credit Suisse pointed out.
While market volatility remains high, the expected risk in the index has reached an all-time low with funds switching to less risky assets.
“In the last quarter we saw a substantial increase in the expected risk (increase in volatility) faced by the markets, and an even more noticeable reaction by market players, who actively reduced their risk exposure by shifting weight to other asset classes, which mostly explains the decrease in risk,” Credit Suisse explained.
Exposure to equity among the pensionskassen in the Credit Suisse index has dropped by 2.73 percentage points over the last quarter to 24.3%, both because of a decrease in value and active asset allocation decisions.
Real estate, mortgages and liquidity funds, on the other hand, reached an all-time high with quarter-on-quarter rises of 0.67 percentage points to 18.09%, 0.38 percentage points to 5% and 1.09 percentage points to 8.84% respectively.
Exposure to alternatives dropped 0.35 percentage points to 4.8%, falling to the level at which they were seen when investors started out in January 2008.
Credit Suisse also noted large funds, worth more than CHF1bn (€670m), by far suffered most in the last quarter as they lost 14.92% while funds worth between CHF1bn and CHF500m were least hit as they lost 11.25%.
Meanwhile, State Street has published calculations suggesting losses suffered by Swiss pensionskassen amounted to 16.83%, more than half of which (-8.79%) was generated in the last quarter.
The State Street index traditionally shows a worse picture of Swiss pensionskassen performance as real estate is not included in the calculations. (See earlier IPE story: Swiss returns slump to -8.38% without property)
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