MPK, the CHF20bn (€16.3bn) pension fund for Swiss retailer Migros, reported an 8.4% annual return for 2013, well above the 6.2% average for Swiss schemes as calculated by pension fund association Asip.
Christoph Ryter, managing director at MPK, told IPE: “Swiss equities – and especially small and mid-cap equities – boosted our performance last year.”
Over the last three years, the pension fund has introduced a core-satellite investment strategy, including small and mid-cap equities, among other things, as a satellite.
The asset class returned 32.2% in 2013, boosting the overall 20.7% contribution from total equities, which made up just over 30% of the portfolio.
Additionally, MPK further diversified its portfolio to increase exposure to corporate bonds, which “helped last year”, Ryter said.
The fixed income portfolio returned 0.7%, mainly thanks to satellite exposure to high yield and convertible bonds, which returned 6%.
For 2014, the pension fund has no plans to make any major shifts in strategy, Ryter said.
However, because the fund is “becoming more cautious” in its assessment of future liabilities, it has lowered the discount rate, or technischer Zins, to 2.5% for all liabilities for employees and pensioners from 3.25% and 2.75%, respectively.
This slowed the increase in the MPK’s funding level, which now stands at 116.9% (from 115.8% in 2012) but which could have been 122.8% if the technical parameters had not been changed.
MPK remains an exception in the Swiss Pensionskassen landscape, as it is still running a defined benefit scheme open to new members.
Other Swiss pension funds have taken similar steps in recent years, adjusting their technical parameters to ensure the long-term sustainability of payments.