Pensionskasse Basel-Stadt (PKBS), the CHF15.6bn (€16.8bn) pension fund of the city of Basel, is sticking with its index-oriented equity strategy and will not cut exposure to US equities despite concerns over concentration risks and high valuations.
Chief investment officer Max-Eric Laubscher told IPE that the fund’s governing bodies had extensively debated broader geographic diversification, including a potential reduction in US exposure.
“We have concluded that, despite the apparent concentration risks, we will stick to our investment principles and continue to pursue an index-oriented investment approach,” the CIO said.
PKBS believes its sustainable investment framework provides sufficient diversification through risk reduction, rather than by actively reshuffling geographic allocations.
“Our underlying sustainable benchmarks include the exclusion of companies based on various ESG criteria,” Laubscher added.
Global equity markets reached record highs last year, although the S&P underperformed indices in Germany, the UK, Japan, China and the MSCI Emerging Markets index, driven by the artificial intelligence boom and a weaker dollar.
US equity valuations, meanwhile, climbed to record levels, supported by AI-related stocks.
From 2026, PKBS will increase foreign equities by 0.5 percentage points to 20.5% of total assets under a revised strategy. The rise will be funded by a 0.5 percentage point cut in foreign real estate.
The fund is also restructuring its bond allocation, splitting fixed income into Swiss franc- and foreign currency-denominated bonds to improve transparency. Swiss franc bonds account for 11% of total assets, while foreign currency bonds make up 2%.
PKBS is excluding US Treasuries entirely from its fixed income portfolio, instead allocating to Scandinavian bonds that offer a similar level of “high security” to Swiss franc-denominated debt, board president Dorothee Frei Hasler said in an interview with the fund’s publication Aspekte.
The new strategy also includes a 0.5 percentage point reduction in loans to increase mortgage exposure, reflecting strong demand from members.
PKBS expects the portfolio’s overall risk-return profile to remain broadly unchanged. Its latest asset/liability management analysis showed a virtually identical risk-return outcome under the revised allocation, Laubscher said.
