SWITZERLAND – Swiss pension funds are increasingly moving towards specialist management, with overseas equities mandates gaining ground at the expense of domestic portfolios, according to the latest two-yearly survey of Swiss pension funds jointly produced by Robeco, Bilanz and Prévoyance Professionnelle Suisse.
The survey finds that only one in nine pension funds now favour balanced mandates compared to one in five in the last survey. A spokesman for the survey says this is because pension funds are increasingly looking to new asset classes to ensure high returns in volatile markets.
“The complexity of both the financial markets and asset classes, both traditional and alternative, that are available to the funds is making balanced mandates increasingly more difficult to manage. This is why so many pension funds in Switzerland now favour specialist managers and portfolios,’ he says.
Elsewhere the report suggests Swiss funds are increasing their allocation to equities, with allocations to fixed income remaining stable. Equities accounted for 38% of all Swiss pension fund allocations in the latest survey, up from 29%. Other than equities, alternatives are also continuing to grow in importance.
“Some 10% of fund allocations now go into alternatives, and we note that hedge funds are gaining in popularity over private equity. We hope funds will show caution, however, when investing in alternatives, as long-term perspectives are likely to pay higher dividends than following market trends and economic cycles,” says the spokesman.
Three quarters of those surveyed said they preferred an active management style for equities, as opposed to two thirds in the last report, but passive management is now more popular for fixed income. The survey finds that over 60% of pension funds prefer passive management of bonds compared with 54% two years ago.
However, the survey spokesman says this is likely to be a short-term trend. “We will probably now start seeing a return to active management for fixed income as the trend among managers to use global reference indices and corporate bonds gathers pace.”
The survey finds that only 17% of Swiss pension funds outsource the management of all their assets. This means that 83% manage at least part of their assets inhouse. This is a clear increase over the last survey that found 61% managed part of their assets themselves.
“Many Swiss funds have become cautious recently. The ‘Golden 90s’ are over and we find performance levels have been dropping somewhat since the last survey. What assets are outsourced is generally now to specialist managers. The real surprise, though, is that 48%, practically one in two pension funds, manages its own overseas equity portfolios,” the spokesman says.