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Switzerland: Record backing for international assets, alternatives

Swiss pension funds have an all-time high exposure to foreign assets, according to Swiss consultancy Complementa.

In its latest risk check-up on the domestic pension industry, Complementa found Switzerland’s Pensionskassen invested almost 70% of their equities portfolios outside the country, while a decade ago this figure was 60%. 

In bonds, the exposure to foreign securities was also at a record high of around 45%. When other asset classes were included, it gave a record exposure to foreign investments.

“For the first time in the Swiss second pillar half of the assets are invested abroad,” Complementa said.

At the same time, the foreign currency quota in the portfolios Complementa looked at continued to decline, reaching 17%.

“The FX hedging quota is at an all time high,” the consultancy said.

As Pensionskassen search for yield and diversification, their exposure to alternative investments also continued to increase. It now stands at 9.1%, another all-time high.  

Additionally, Complementa said alternatives allocations were much more diversified than four years ago, when portfolios were typically made up of private equity, commodities, and hedge funds.

Complementa said there had been an “unbroken trend” of adding alternative asset classes.

“Pensionskassen increase exposure to or make first-time investments mainly in insurance-linked securities, private debt and infrastructure,” the consultancy said.

At the same time, commodity allocations shrank in light of disappointing returns.

Looking to the future, Complementa said it was pessimistic about future returns of Swiss Pensionskassen. For the first four months of 2017 the firm calculated a 2.9% return on average, after a full-year return of 3.7% for all of 2016.

However, it noted the returns over the last five years were “uncharacteristically high”. This was likely to change, Complementa said: “Currently our return outlook stands at 2.2%.”

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