SWITZERLAND – BVK, one of Switzerland’s largest pension funds with CHF19.4bn (€12.3bn) in assets, says it finished 2005 with a return of 10.5% - somewhat below the industry average of 13%.

In its annual report for 2005, BVK said its return trailed the industry average partly because of a decision not to raise its exposure to equities in spite of last year’s bull run. It said the decision was related to a “continued cautious approach to investing”.

BVK, which insures civil servants in the Swiss canton of Zurich, had 26.4% invested in equities as per December 31 2005. Remaining allocations included 26.8% to bonds, 23.9% to money market instruments and 22.9% to real estate assets. Head of portfolio management at BVK is Daniel Gloor.

BVK’s investment approach permitted it to boost its coverage ratio – the extent to which pension liabilities are met – to 97.65% in 2005 from 91.4% in 2004.

“This result shows that we have taken one big step closer to our goal of being fully funded,” commented Rolf Huber, BVK’s chief executive.

“We will reach that goal over the next few years and build reserves. In this way, we ensure that neither taxpayers nor the members will be burdened with the cost of restructuring the scheme. This sets us apart from other funds in Swiss cantons,” Huber added.

Indeed, many public Swiss pension funds still suffer from chronic underfunding, mainly due to an overexposure to equities prior to the market crash of 2000-2003.

However, an implicit government guarantee – which is paid for by tax revenue – has enabled the public schemes to have coverage ratios far below 100%.

Huber also noted that at CHF99 per insured member, the BVK’s administrative costs were the lowest in the industry. According to him, administrative costs at other Swiss schemes ranged from CHF130 to as much as CHF512 per insured member.

Finally, the BVK said that at the end of 2005, it had 63,792 contributing members, up from 60,424 a year before. The scheme also had 21,562 pensioners.