The CHF21bn (€17.2bn) Migros Pensionskasse (MPK) reported a 7% return for 2014, helping increase its funding level to 121.5%.
MPK managing director Christoph Ryter commented the pension fund’s buffers were “fully filled for the first time in 13 years”, after funding increased from 116.9% at the end of 2013 and rose 250 basis points above target.
Ryter added that funding remained above target even in the wake of the Swiss National Bank’s (SNB) decision in mid-January to cut the peg to the euro.
He confirmed the announcement led to “temporary losses” due to its unhedged currency positions, as well as the Swiss equity holdings within MPK’s portfolio, but noted that the losses had been “partly recovered in the meantime”.
“We are much more worried about the medium-term outlook,” said the managing director, with bonds and loans – comprising 40% of the fund’s portfolio – returning virtually nothing.
Over the next months the board of directors would “analyse the situation in detail to have a well-founded basis for discussing possible options”, Ryter noted.
In 2014, the FX hedges in place cost the MPK some performance as benchmark indices returned just over 9%.
Per year-end hedged foreign corporates made up 11.6% of the portfolio and hedged foreign sovereigns 4.8% while unhedged foreign bonds amounted to 4.5%.
In total, the MPK had 41.3% in bonds, 4% in loans, 1.5% in liquid instruments, 31.2% in equities and 27.5% in real estate.
Ryter is convinced “broad diversification to which we stick also in times of crisis” is the “best protection against unwelcome surprises”.
In the wake of the SNB’s decision only “minor tactical adjustments” had been necessary but no major shifts in the asset allocation, he added.