Pension funds in Germany and Switzerland are rebalancing their portfolios to capture new investment opportunities and guard against mounting macroeconomic and market risks.
In Germany, KZVK, the occupational pension provider for church employees, has reduced its exposure to European equity mandates in anticipation of muted returns from the asset class. It has also unwound equity risk derivatives and shifted capital into fixed income, primarily investment-grade corporate bonds and sovereign debt issued by developed market governments.
In a move that diverges from its overall strategy of underweighting China, KZVK has awarded a $50m Chinese equity mandate to Fullgoal Asset Management, a Hong Kong-based subsidiary of Shanghai’s Fullgoal Fund Management. The allocation spans Chinese equities listed in Hong Kong, onshore mainland exchanges and in the US.
KZVK has also increased its private markets exposure.
In contrast, the €11.4bn church pension fund Kirchliche Zusatzversorgungskasse Rheinland-Westfalen, also known as KZVK, has reduced its private equity allocations in favour of bearer bonds.
New private equity investments amounted to €158m last year, down from close to €300m in the previous year. Meanwhile, allocations to bearer bonds and other fixed income instruments rose by €450m year-on-year to €2.66bn in 2024, according to the fund’s financial statement published last week.
Ärzteversorgung Westfalen-Lippe (ÄVWL), the pension fund for doctors in the Westphalia-Lippe region, has increased its holdings of directly held bonds, a strategy that has paid off in terms of returns. It also overweighted US assets, benefiting from dollar strength.
In Switzerland, pension funds are deploying currency hedges to shield their globally diversified portfolios from foreign exchange volatility.
The appreciation of the Swiss franc by more than 7% year to date has dented returns on unhedged foreign currency assets, according to the country’s occupational pension supervisor, the Oberaufsichtskommission Berufliche Vorsorge (OAK BV).
Despite this headwind, the financial health of Swiss pension funds remains robust. Average returns reached 2% in the first half of 2025, lifting the average funding ratio from 114.7% at the end of 2024 to 116.4% as of 30 June, according to OAK BV.
Items to note:
- New research shows that the asset management industry needs to take advantage of the new sources of organic growth found in new client groups
Luigi Serenelli
IPE DACH Correspondent
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