Migros Pensionskasse, the CHF25.9bn (€23.8bn) pension fund for the Swiss retailer, will increase its asset allocation to real assets by seven percentage points to 37% this year.

The Pensionskasse will invest in real estate in Switzerland and abroad, with 4% of the total real assets allocation in a new infrastructure category, which includes renewable energy and wind or solar energy power plants.

The new investment strategy, approved by the Migros’ board of trustees in November, has kicked in on 1 January, it announced.

Under the new plan, Migros will reduce its exposure to equities by two percentage points to 28% of its total assets, balanced with a 2% allocation in gold to reduce investment risk.

The scheme will also cut down allocations in nominal value investments this year by seven percentage points to 33%, while at the same time increasing allocations in tangible assets to 67% from 60% last year.

Migros conducted an asset liability management (ALM) analysis from April to November last year in order to design the new strategy for 2021, it said.

The ALM took into account low interest rates and the effects of the COVID-19 pandemic with its market turbulence in Q1 2020 to define expected returns. Over the next decade, Migros expects average returns of 4.1%, down from 5.4% achieved in the last 10 years.

At the end of October, the scheme recorded a return of 1.3%, mainly as a consequence of the positive results of direct real estate investments. Real estate recorded a positive return of 4.6%, with a nominal value investments return of 1.4%, while equities stood at -2.7%.

According to Migros’ interim results from last October , the Pensionskasse had allocated CHF8.66bn to real estate, CHF7.36bn to equities, and CHF9.95bn to nominal value investments.

Additionally, CO2 emissions for its equity and corporate bonds portfolios fell by 30% compared to standard indexes, one year after the scheme implemented a new climate strategy, it said.

Migros plans to continue to reduce CO2 emissions in its portfolio this year by cutting ties with companies that have large holdings in the coal mining and processing sector, it said.

To read the digital edition of IPE’s latest magazine click here.