Swiss corporate pension funds are reviewing their strategic asset allocations to reflect increasing risks of re-emerging inflation and de-globalisation, according to WTW.

Central banks are still fighting to bring down inflation, disappointing market expectations on rates cuts. 

Investors have been looking closely at central bank monetary policies, especially at the end of the quarter, WTW said in an update. 

Yesterday, the US Bureau of Labor Statistics reported that inflation in the US increased by 0.4% on a seasonally adjusted basis, the same increase as in February. Over the last 12 months, the consumer price index increased 3.5%, up from 3.2% in February.

WTW said de-globalisation was progressing and geopolitical tensions with the risk of armed conflicts remain.

“Consequently, we see that pension funds review their strategic asset allocation to reflect that increasing risk component,” said Alexandra Tischendorf, head of investment at WTW Switzerland. 

Positive market developments in the first quarter of this year have led to returns of 5% on Swiss corporate schemes’ invested assets, according to WTW.

Pension funds’ assets grew by 5% over the quarter, with funding ratios increasing by 6.2% in Q1 this year, according to WTW’s Pension Index, from 119.9% at the end of 2023 to 126.1% at the end of March this year. 

Adam Casey, head of corporate retirement consulting at WTW in Zurich, said: “Due to the positive investment returns of recent months and no significant changes to local funding technical interest rates expected, given current bond yield levels, the fluctuation reserves of Swiss pension funds are typically at comfortable levels again.”

This further reduces the risk of underfunding and the resulting additional contributions by companies, he added