SWITZERLAND - The canton of the region of Basel is investigating whether to switch from a defined benefit scheme to a defined contribution plan for its CHF4.5bn (€3bn) public pension fund BLPK, in the wake of the recent crisis.

The fund's investment fell in value by almost 15% last year and its funding level deteriorated to under 80%. (See earlier IPE story: BLPK returns -14.78%

Yet in August the BLPK managed to achieve a 1.12% return, raising its performance for the first eight months of this year to 6.54%.

The regional parliament has now accepted a motion by the Swiss conservative party (SVP) in the canton to look into a possible change from a defined benefit to a defined contribution system for its 25,000 members. The BLPK began offering DC plans for certain new members from last year.

In its motion, the SVP had argued it would not make sense to push the funding level back to 100% with one major financial push from the canton.

Instead, officials suggested that recovering markets as well as recovery measures for the fund should help the pensionskasse to eventually become fully-funded again.

"However, retirement providers will most likely have to brace themselves for a longer, difficult investment environment", claimed the political party in a statement.

The canton's financial commission has meanwhile approved the BLPK's 2008 annual report and praised the fund's asset allocation and its diversification, for preventing further losses.

According to the annual report, the fund had 23.7% in equities at the end of last year, compared to a 32% strategic allocation.

Real estate made up 20.5% instead of 23% and bonds amounted to 51.4% of the asset allocation instead of 40%.

The rest was invested in cash, other fixed-income instruments and alternative investments including private equity (2.6%), hedge funds (1%) and commodities (0.8%).

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