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Swiss pension fund returns recover in third quarter

SWITZERLAND - Returns for Pensionskassen, rebounded strongly in the third quarter after a weak first half, according to calculations by WM Performance Services.

WM said Swiss pension funds had an average return of 5.2% for the third quarter of 2006. This compares with a return of -0.3% for the first half, when the schemes were hit by a severe correction in both the equity and bond markets.

WM said that as a result of the much better third quarter, Pensionskassen averaged a return of 4.1% for the first nine months of 2006. It attributed the improvement to the stronger equity and bond markets.

In 2005, thanks largely to a continued bull run on equity markets, the Pensionskassen achieved an average return of 12%.

WM also said that during the third quarter, transaction costs for Swiss institutional investors fell by 5.1% to just under 26 basis points. This put Switzerland well under the global level of 43.1 basis points, it added.

According to WM, a unit of US investor services group State Street, transaction costs make up two-thirds of total asset management costs for Swiss institutional investors.
Separately, Swiss consultant Lusenti Partners said Swiss Pensionskassen had increased exposure to alternatives, including hedge funds, private equity and commodities, in the past two years.

Pensionskassen questioned by Lusenti said they had 4% invested in alternatives as of July 2006 against 2.3% in June 2004. The Lusenti sample included 164 schemes with CHF186.6bn (€117.5bn) in assets.

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