Publica, Switzerland’s biggest pension scheme with consolidated assets of CHF43.7bn (€42bn), has recorded an uptick in net returns last year to 4.4% from 4.2% in 2020, with equities replacing bonds as the most high-returning asset class.
In 2020 bonds had the most significant impact of 1.8% on the pension fund’s overall performance with returns of 3%, according to the pension fund’s latest financial statement.
Last year, instead, equities contributed the most with 4.3% to its net performance with returns of almost 17%, the pension fund said in a note.
Investments in stocks in North America topped its returns within the asset class in 2021, followed by Swiss and European (ex-Switzerland) equities with over 20% returns each.
For Japanese and the Pacific region (excluding Japan) equities there were returns of 10%, and in emerging markets of around 6%, Publica explained in the note, adding that it would release further figures in its annual financial statement in spring.
The exposure to equities laid bare the difference in performance resulting from the strategies of the open and closed pension plans last year.
The investment strategy of the open pension plans, with an equity allocation worth 27% of its portfolio, led to total net returns of 4.6% in 2021 compared with 4.2% in 2020.
While the total net return of the closed pension plans, which has an equity allocation of 10%, stood at 2.1% in 2021 compared with 3.9% in 2020.
Publica pursues a riskier investment strategy for the open pension plans than for the closed pension plans because of the expected number of members. The closed pension plans are in fact not open to new entrants.
Publica had under management 12 open pension plans with assets totalling CHF40.8bn, and seven closed pension plans with total assets of CHF2.9bn in the year under review.
Looking at other asset classes, directly held Swiss real estate achieved a return of 5.2% at the end of last year, while foreign real estate funds returned almost 12% on a currency-hedged basis.
Returns on precious metals and bonds were weaker at -2.4% and 0.6%, respectively. Publica invests part of its assets in precious metals such as gold and silver to diversify its portfolio.
Within its bonds portfolio, US and European inflation-linked government bonds recorded the best performance yielding 5%. Foreign government bonds achieved average returns of -3%, one percentage point lower than Swiss bonds and corporate bonds each at just under -2%, due to increasing nominal interest rates.
Private debt investments returned just under -1% and government bonds from emerging countries in local currencies at 0%.
Publica’s consolidated net investment performance was 0.3% above the benchmark last year. Without currency hedging, the consolidated net performance would have gone up to 4.9%, it said.
Tactical and selective decisions had an overall positive impact on the performance of the pension fund of 0.55%. The asset management costs including taxes stood at around 0.25%.