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Swiss pension fund SBB buys parent company's mortgage business

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SWITZERLAND - The SBB pension fund has taken on CHF620m (€524m) in mortgages from its sponsor, Switzerland’s federal railways company.

SBB was seeking to free up money to make investments in its core business and decided to sell off its business, with mortgages granted to 64 railway and 11 other building cooperatives.

The SBB Pensionskasse said the investment would bring long-term, fixed income assets with stable returns.

It added that the portfolio had been valued by external experts and was “in line with the market value”.

This new investment will more than double the fund’s exposure to mortgages, allocating CHF508m at the end of 2011 - the equivalent of 3.6% of assets.

With the SBB’s mortgage portfolio, the SBB Pensionskasse will achieve its strategic allocation level for mortgages of 5%.

Last year, mortgages contributed 0.11% to the SBB pension fund’s overall performance of 1.85%, helping the fund to outperform its benchmark by 0.83 percentage points.

The CHF14.5bn scheme stressed that there would be no changes to existing mortgage arrangements and that it would continue to grant mortgages to railway building cooperatives, but not to cooperatives outside the sector. 

The railway building cooperatives, established over the past 100 years by SBB employees to provide flats for co-workers and their families, saw mortgages and loans provided by the parent company.

Overall, there are around 70 railway building cooperatives in Switzerland, owning several thousand flats, according to the SBB Pensionskasse.

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