BVK, the CHF30bn (€24.5bn) pension fund for the Swiss canton of Zurich, announced that it lost 0.7% on investments last year, although it still managed to outperform its benchmark thanks to the performance of its real estate holdings.

The overall return for 2015 was worse than the 0% average calculated for Swiss pension funds by some consultancies but better than that of Publica, the federal public pension fund, which lost 2.5% over the same period.

The BVK’s real estate portfolio currently makes up just over 20% of its total investments, nearly all of it being in Swiss direct holdings.

The fund said it continued to aim for “broad diversification”, including commodity investments and emerging markets in their portfolio despite their both having “cost some return in 2015”.

Its funding level dropped from 99.3% at year-end 2014 to 96.1% in 2015.

However, the BVK took pains to emphasise that, compared with other Pensionskassen, it had very low administration costs, which “offsets some losses in times of bad returns”.

The fund also argued that the ongoing low-interest-rate environment had justified its decision to radically adjust its technical parameters from 2017, a move criticised by unions and the media but unanimously supported by the trustee board. 

The discount rate applied to active members’ assets will be cut from 3.25% to 2%, which automatically leads to a cut in conversion rates.

From 2017, a man retiring at 65 will be subject to a conversion rate of 4.82% – applied to calculate a life-long pension from his assets – whereas currently a rate of 6.2% is applied.

In its most recent press release, the BVK sought to dispel a number of rumours in the media regarding recent changes at the scheme.

It said the median pension would decrease by 8% and not 17% as reported by some, and that these losses would be offset by higher contributions from employers and employees.

It also announced that, in order to make its investments more sustainable, it joined forces with six other retirement providers last year to found a new ESG association called SVVK-ASIR.