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Swiss schemes’ real estate allocation rising

SWITZERLAND – Swiss pension funds’ allocation to real estate has grown 50% in the last two years Credit Swiss Asset Management says.

In its quarterly “Swiss Pension Fund Index” report CSAM says that while the asset allocation outlook reveals little change compared with last quarter, real estate investments have recorded the most consistent progress with a +0.8% rise - to 11.8%.

“This underlines the attractiveness of this investment class,” CSAM commented - adding that in the first quarter of 2002, the average allocation to property amounted to eight percent.

“It is also interesting to see that alternative investments have not progressed since last quarter,” CSAM also said, pointing that the average allocation to the asset class stays put at 1.8%, a share worth nine billion francs (5.8 billion euros).

Equities have had a 0.8% reduction, breaking down to –0.5% Swiss equities and –0.3 in foreign equities, compared with the second quarter. Swiss bonds were unaltered at 33.4% and foreign bonds have gone up 0.1%, to 10.4%.

A comparison between pension funds’ monetary allocation in the last quarter and at the beginning of the year reveals that allocation to Swiss francs has risen three percent to 73% since the beginning of the year and one percent since last quarter.

Euro investments have fallen from 12% of the first quarter to 10% of the next two quarters while the dollar has had a gradual decrease from 11% of the beginning of the year to 10% in the next quarter and nine percent of the third quarter.

Pension funds’ attitude towards risk has little altered from the second quarter, CSAM said.

At the end of September three pension funds, compared with five of the second quarter, had an annualised risks margin of 10%.

“It is worth pointing out that particularly pension funds with annualised risks between two percent and four percent are in a position to step up returns,” CSAM said, adding that pension funds are moving away from the theory that longer term risks are compensated with higher returns.

In the third quarter pension funds worth between 150 million francs to 500 million francs have returned 0.548%, performing better than other pension funds.

CSAM has split its index’ pension funds in four size-categories; less than 150 million francs, between 150 to 500 million francs, 500 million to a billion and more than a billion.

According to CSAM pension fund the 150 to 500 million has outperformed the index, with the “very large ones have tended to find themselves rather down the index in the last two years”.

The CSAM report also indicates that pension funds were managing a total of 500 billion francs at the end of September 2004.

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