The Swiss pension fund for small and medium-sized companies, Profond, has recorded a return of 12.7% in 2021, up from 2.7% the prior year, as a result of its investment strategy which includes a high allocation to equity and real estate investments, it said announcing preliminary figures.
Profond invests 52.3% of its assets in equities – including 21.7% in Swiss equities and 30.6% in foreign equities – 11.8% in bonds – including 3.8% in Swiss and 8% in foreign currency denominated bonds – 25% in real estate, 3.9% in alternative investments and 7% liquidity, according to the pension fund’s financial statement.
The scheme’s total assets grew to CHF10.9bn (€10.4bn) as of the end of November last year from CHF9.8bn in 2020. it caters for 58,434 members, against 55,891 in 2020.
The pension fund’s funding ratio at the end of last year stood at 117%, according to preliminary figures, against 109.6% recorded in 2020.
Profond will pay an “exceptionally high ”interest rate on pension assets of 8% in 2021, up from 1.75% in 2020, as a consequence of the positive returns, it said, adding that the current retirees receive a one-off supplementary pension of CHF1,000.
This year it will pay an interest on special accounts, meaning uncommitted funds and employer contribution reserves, of 0.5%, it added.
The pension fund is meanwhile gradually cutting the conversion rate used to calculate pension pay-outs by 0.2% over the next years. It has set the conversion rate at 6% in 2022, down from 6.4% in 2020, at 5.8% for 2023 and 5.6% in 2024 to reduce the redistribution in the second pillar between active members and new pensioners.
A strategy generating returns over the years could contribute to compensate for the reduction of the conversion rate. Average annual return at the scheme over the last 30 years stood at 5.4%, with last year’s performance representing an improvement from a 2.7% return achieved in 2020.
Swiss equities returned 6% in 2020, in line with the benchmark, foreign equities 1.1%, above the benchmark of 0.8%. Real estate returned 3.2% in 2020, below the benchmark of 5.1%, while alternative investments recorded a 2.6% return against a 5.5% benchmark. Swiss bonds returned 0.2% against a 0.8% benchmark, and foreign bonds 2.1%, above the 1.8% benchmark.
The pension fund’s strategy for the period 2021-2023 will focus on maintaining sustainable risk-bearing capacity to secure performance and meet pension promises, it said.
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