The surge in pension fund performance unleashed by this year's liberalisation of investment restrictions in Austria has already been reflected in Pictet & Cie's popular benchmark index.

Austrian pension fund managers check their performance against this six-year-old benchmark, created by Swiss asset managers Pictet. It is called APPI (Austria Pensionskassen Performance-Index) and has two variants - APPI 1 includes money market instruments and APPI 2 does not.

The new regulations have improved the returns - the simple reason is the stocks position. This improves it substantially," says Marco Bagutti, portfolio manager at Pictet in Zurich.

The two benchmarks are theoretical portfolios, which Pictet creates by taking an average of all portfolios possible within the Austrian regulations. As an almost infinite number of porfolios are technically possible, Pictet makes its task simpler by working in weighting blocks of no less than five percentage points. The portfolios do not include the less liquid asset class of property.

As well working out an average, Pictet also calculates every quarter what the worst-performing possible portfolio mix would have been, and what return it gave, and the best theoretical performer.

Following the new investment regulations, the asset mix in the average portfolios has changed as follows. In the new APPI 1 portfolio, the weighting of Austrian shares has risen to 14.92% from 11.82%, with the foreign equities portion up to 8.72% from 6.36%.

Foreign currency bonds rose to 17.26% from 10%, with domestic bonds falling to 35.34% from 46.82%.

The overall return for APPI 1 in the first quarter was 3.10%, which Bagutti says is much better than it would have been had the old regulations held sway.

Pictet came up with the APPI benchmark in 1991, which follows the same lines as its Swiss index which has become the standard benchmark for pension plans. Bagutti says the indices are a good marketing tool for Pictet. They are sent to between 80 and 100 addresses in Austria and as yet have no rival."