The Pensionskasse of the city of Zurich (PKZH) has increased its allocation to alternative investments to 25%, from 20.7% in 2021, according to its latest financial statement for 2022.

Within alternatives, the scheme invests 11.3% in private equity (up from 9.9% in 2021), 8.5% in hedge funds (up from 6.9% in 2021), 3.4% in insurance linked securities, and 1.8% in private debt, the statement added.

PKZH invests 2.5% of its asset in cash, 17.6% in real estate, 27.9% in equites, 30.2% in nominal value investments.

The pension fund returned -10.4% last year, with assets under management falling from CHF21.57bn in 2021 to CHF19.27bn in 2022, according to the statement.

Its funding ratio plummeted year-on-year from 121.9% in 2021 to 114.3% in 2021.

The situation so far in 2023 has slightly improved since the end of the year, with the funding ratio standing now at 116.7%, total assets worth CHF19.85bn, and returns back in positive territory at 2.9%.

AMAS urges policymakers to review pension funds’ assets in light of reform

The Asset Management Association Switzerland (AMAS) is calling on policymakers to take into account the assets invested by Pensionskassen to reform the country’s second pillar pension system.

“Future reforms should definitely take into account the assets side of pension funds in order to create the best framework for their management,” AMAS managing director Adrian Schatzmann said.

The strong corrections experienced last year for almost all asset classes are a wake-up call to reform the system, but without focusing only on the liabilities side of the Pensionskassen, by lowering the conversion rates to calculate pension payouts or higher retirement age, it added.

Last year, according to a report published by the association this week, the Pensionskassen returned on average -9.1%, with assets under magnet shrinking by CHF105bn to a total of CHF1.07trn.

However, over the last 15 years, the returns have led to assets increasing by CHF333bn, which corresponds to an average of over CHF22bn per year, the report added.

Swiss schemes invest around 29% of the assets in equities, 31% in bonds and 23% in real estate, 13% in alternative and other investments, and 4% in cash.

Austrian pension funds see AUM shoot up

Assets under management (AUM) of Austrian provident funds (Vorsorgekassen) and Pensionskassen rose quarter-on-quarter, according to the latest figures published by the Financial Market Authority (FMA).

Total assets of provident funds grew by 2.65% to €17bn quarter-on-quarter in Q1 this year. The Vorsorgekassen returned 0.65% in Q1, and 1.28% per year over the past 10 years, according to the report.

The schemes invest the largest portion of assets in bonds (61.72%) and bank deposits (10%), while equities follow with 12.96%, real estate with 6.86%, loans with 4.5%, and other assets (3.98%).

The provident funds increased their allocation to equities by 2.53 percentage points, from 10.43% in Q4 2022 to 12.96% in Q1 this year, reducing the cash component by the same share.

The number of pension beneficiaries in provident funds saw an uptick, from 10.50 at the end of 2022 to 10.59 in Q1 this year.

Assets under management of Pensionskassen also increased quarter-on-quarter by 2.02% to €24.84bn.

The Pensionskassen invest their largest portion of assets in equities (37.24%) and bonds (32.73%0, while 7.25% is invested in cash, 7.01% in real estate, 7.25% in bank deposits, 2.62% in loans, and 13.15% in other investments.

In the last quarter, the pension funds have slightly increased their allocation to bonds and equities, cutting bank deposits.The schemes have returned 1.66% year-to-date, compared with -9.68% recorded at the end of 2022.

Spezialfonds add €30bn to sustainable investments

The share of sustainable investments in German Spezialfonds has increased by €30bn in the last quarter to a total of €170bn, according to Germany’s fund industry association BVI.

The reason that has led to a large increase in assets invested according to ESG criteria is the reclassification of sustainable investments from Article 9 to Article 8 funds under the Sustainable Finance Disclosure Regulation (SFDR), the association said.

In the first quarter of this year, assets managed in funds investing according to ESG standards, in line with with Article 8 and 9 of the EU Disclosure Regulation, reached a new record of €808bn, up 7% compared with the end of the year.

The German fund industry overall, instead, recorded a 0.5% loss in terms of assets manager in the first quarter of 2023.

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