Migros Pensionskasse, the CHF25.9bn (€23.8bn) pension fund for the Swiss retailer, will increase its asset allocation to real assets from 60% to 67% this year. The real estate investments now represent 37% of its total allocation.

Real estate made a significant contribution to the overall results of the Pensionskasse with total returns of 9.4% in 2021, above the benchmark of 5.9%, the pension fund said in a statement.

Indirect investment in foreign real estate returned 14.9% last year, above its target of 8.2%, direct investment in Swiss real estate returned 7.3% against a benchmark of 5% and allocation to infrastructure achieved 10.4% returns against a benchmark of 6.1%.

Equities topped returns among all asset classes (18.9%), but below the benchmark of 20%. Swiss equities returned 22.1% last year, below the target of 23.4%, and foreign equities 20.8%, below the benchmark of 22%.

“Real assets are an important pillar of our investment strategy with a total weight of 67% [including] 28% equities, 2% gold and 37% real estate,” split into real estate in Switzerland, foreign and infrastructure, Migros’ chief executive officer Christoph Ryter and chief investment officer Stephan Bereuter told IPE in a joint interview to comment on the results.

Real estate investments also recorded “a very high performance” last year, making a “major contribution to the good result,” they added.

MPK expects to be able to achieve its new targets for equities, real estate and nominal value investments by the end of 2022, according to its strategy, the chiefs said.

The pension fund allocates 34.6% of the assets in nominal value investments, 28.7% in equities, 34.8% in real estate and 1.9% in gold, as of the end of December.

MPK did not expect such a positive result in 2021 after a difficult start of year with uncertainties relating to the COVID-19 pandemic and restrictions in place to stop the spreading of the virus.

The good performance is also the result of a strong year for equities, posting double-digit returns for the third consecutive year after 2019 and 2020, Ryter and Bereuter said.

“We did not expect this to this extent against the background of the global pandemic,” they said, adding that the result is “particularly pleasing” compared with the pension fund’s own benchmark, the Credit Suisse pension fund index (8.2%) and the Pensionskassen’s performance according to UBS index (8.1%).

With high inflation in America and Europe likely to result in tighter monetary policies, “we expect lower returns and more volatility in 2022,” the duo said.

The performance of nominal value investments last year was 0.2%. Government bonds denominated in foreign currency had a negative impact on the results with -2.9%. The allocation in sustainably mined gold, built up over the year, resulted in a return of -1.3%.

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