GERMANY - Pensionskassen, or insurance-type German pension funds, continue to invest heavily in bonds while keeping exposure to equities well below that of their Swiss and Austrian peers, a new survey by international accountant Ernst & Young reflects.

According to the survey, unveiled at a meeting of German Pensionskassen in Cologne today, the schemes have around 75% of their assets invested in fixed income.

For equities, the ratio is 15%, the survey showed. Another 5% of Pensionskassen assets is allocated to real estate and the remaining 5% is held in cash and in alternatives like private equity and hedge funds.

"The equity ratio might be a bit higher right now, but not much," said Andreas Freiling, head of insurance at Ernst & Young's German arm. Freiling said the survey, carried out jointly with the German think-tank FAZ Institut, was representative.

At the last count, German Pensionskassen made up around one-fifth of the €381bn in total corporate pension assets. As insurance entities, the schemes guarantee an annual return of 2.25%, which is achieved through a mix of conservative investing and tight regulation.

But Swiss schemes, which guarantee an annual return of 2.5%, had at least 20% invested in equities last year and, in some cases, 40%. Austrian pension funds also had between 20-40% allocated to shares during 2006.

According to Freiling, the German schemes' high exposure to fixed income was due to their preference to have "a high degree of liquidity and low volatility when investing".

"On the other hand, the schemes say that their greatest priority when investing is to maximise returns," he said.

However, Freiling said that when German Pensionskassen aim to boost their returns, they do not rely on alternatives like private equity and hedge funds but, increasingly, structured products, based on derivatives such as swaps and options.