The pension fund for the canton of Vaud (CPEV) has dropped investments in hedge funds and commodities, replacing the latter with physical gold. The move is part of a review to its strategic asset allocation drawn up last year, according to its 2020 financial statement published last week.
According to its 2020 annual report, CPEV invested CHF546.96m (€498.36m) in hedge funds, compared to CHF702.64m as stated in its 2019 annual report. A concrete reason was not disclosed as to why the pension fund exited the asset class.
The pension fund has replaced commodities with physical gold because its origin is certified, it said.
The newly-adopted allocation strategy will determine the returns on assets that CPEV expects over the next few years, it said.
The fund achieved a net performance of 5% in 2020, compared with 13.6% in 2019. Assets under management totalled CHF14.3bn (€13bn).
It recorded an overall “satisfactory” performance in 2020, given the sharp drop in equity markets at the end of the first quarter last year, followed by a sudden rise at the end of the year, which more than offset the decline in prices occurred in spring, it added.
The pension fund’s real estate and infrastructure assets represented an important and reassuring part of its allocation in the past turbulent times, it said. The fund’s real estate portfolio includes 281 buildings, 8,166 apartments and 155 apartment units built in communal parks.
The CPEV’s investment portfolio spreads over several asset classes with optimal diversification as one of the main objectives.
According to the financial statement, it allocates 23.1% to direct and indirect Swiss real estate investments, 13.2% to developed market equities, 12.1% to Swiss equities, 6.6% to Swiss bonds, 5.5% to government bonds, 4.6% to private placements, 5.4% to real estate securities, 4.7% to emerging market equities, 3.6% to emerging market bonds, 3.7% to convertible bonds, 2.9% to foreign indirect real estate investments, 2.5% to infrastructure, 3.4% cash, 3.4% to corporate bonds and the remainder to high yield bonds.
The CPEV has integrated environment social and corporate governance (ESG) elements in its investment strategy for several years.
Its board adopted a new climate strategy last September that defines the path towards carbon neutrality of investments in securities by 2050 and towards a significant reduction in CO2 emissions linked to the production of heat from real estate.
At the end of 2020, the CPEV had a total of 58,487 members, including 38,830 active insured members and 19,657 retirees.
The number of the active insured members – a majority which is is employed by the Canton of Vaud – increased by 1,268, or 3.38%, last year, compared with 2019.
The number of pensioners increased by 670, or 3.53%, year-on-year in 2020.
At the end of 2020, the funding ratio of the scheme stood at 71.4%, above the 67.3% set for its recapitalization path, but below the 72.3% number for 2019.