Equities, Swiss real estate push Migros’ returns in 2020

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Migros Pensionskasse, the CHF27.5bn (€25.3bn) pension fund for the Swiss retailer, hit positive returns of 6.5% in 2020, above the 5.9% benchmark, boosted by its investment portolios in equities and Swiss real estate.

The Pensionskasse witnessed its performance falling “deep in the red” after the equity market downfall earlier last year, it said, adding that final positive returns at the end of 2020 were “unexpected”.

It benefited from the “strong recovery” from equity markets in the second and third quarters of last year, following several measures taken by central banks and governments to support the gobal economy during the COVID-19 pandemic, it said.

Equities returned 10.1% in 2020, above the benchmark of 9.1%, but distant from the 26.3% achieved in 2019, the scheme stated. Equity satellite investments – a combination of small cap, emerging markets all cap, world defensive equities and private equity – delivered the best performance in the category with 14.9%.

Returns for foreign equities stood at 11.1%, and at 5.4% for Swiss equities. Equity satellite investments lagged behind the benchmark by 1.6 percentage points in 2019, instead, with a performance of 23.1%.

Real estate investments hit 6.8% returns overall last year, with Swiss real estate assets yielding the best performance of 8.4% and satellite investments, including foreign real estate, Swiss real estate (indirect allocations). and infrastructure, which stood at 3.3%.

The market value for the pension fund’s Swiss real estate direct investments stood at CHF6bn.

Strategic shift

Migros Pensionskasse relies on a diversified strategy with a high weight on investments in real assets. Its board of trustees has decided to overhaul its investment strategy by increasing allocations to real assets by seven percentage points to 67% from 2021.

It will also invest 4% of its total real assets in a new infrastructure category, which includes renewable energy and wind or solar energy power plants, it said.

The scheme will reduce its allocation to nominal value investments by seven percentage points to 33%.

Returns on government bonds fell year-on-year in 2020 to 4.1% from 4.8% the prior year, while corporate bonds returns stood at 5.6% against 8% in 2019.

At the end of last year, the scheme allocated 38% to nominal value investments against a strategic 40%; 29.8% was allocated to equities, and 32.8% to real estate against a strategic 30% for both asset classes.