Publica, Switzerland’s largest pension fund with €42.1bn in assets, recorded “unexpected” positive net total returns of 4.2% last year against the backdrop of the crisis caused by the COVID-19 pandemic, it said.
Returns in 2020, a year that saw an equity market crash, sinking oil prices and a large intervention of central banks to pump liquidity and provide support for the economy, were below the 9% achieved in 2019, it said.
The consolidated net performance at the end of last year stood at 0.04%, below the benchmark set by Publica. The performance was overall positive at 0.18%, but turned negative after deducting 0.22% for asset management costs, it said.
Publica relied on two investment strategies for its 13 closed and seven open pension schemes, which led in turn to achieving different returns. Open pension schemes returned 4.2%, compared to 9.2% in 2019, while closed schemes reached 3.9% compared to 6.8% the prior year.
Assets for open pension schemes make up the largest chunk of the total assets with €39bn, while the remainder €3.1bn is in closed pension schemes.
Bonds pushed up the value of its consolidated assets portfolio by 1.8% with the best performance among all assets classes leading to a 3% return. Within bonds investments, European and US inflation-hedged government bonds yielded the best return with 7.4%, followed by private debt with 7.3%, and UK government bonds with 7.1%.
US dollar denominated emerging markets (EM) government bonds returned 7.1%, while emerging markets government bonds in local currencies performed poorly at -3.2%.
With a total return of 4.2%, equities contributed to Publica’s consolidated performance with 1.5%. Equities followed different performance trajectories according to regions, with the best-performing stocks in North America, followed by EM and Switzerland. In Japan and the Pacific region, returns on equities were only marginally positive and in Europe slightly negative, Publica said.
Direct real estate investments in Switzerland, including revaluations, recorded returns of 5.3% at the end of last year, while investments in foreign real estate funds returned -0.7% on a currency-hedged basis. Overall, real estate contributed to total assets with returns of 0.3%.
Investments in precious metals such as gold and silver yielded returns of over 15% last year, adding 0.4% to total returns.