Swiss pension funds are sounding the alarm over the potential return of ultra-low or negative interest rates, warning that such a policy stance would have far-reaching consequences for liquidity management and asset allocation.
Peter Hofmann, chair of the CHF4bn multi-employer scheme Tellco Pensionskasse, issued a public letter to the Swiss National Bank (SNB) following comments by SNB vice chair Martin Schlegel at the Swiss Media Forum in Lucerne last month, where he did not rule out a return to negative rates.
In his letter, Hofmann urged the central bank to avoid policies that once again make pension funds “collateral victims of a strategy aimed at weakening the Swiss franc”, arguing that previous negative rate regimes had “placed a massive strain” on Pensionskassen.
Hofmann emphasised the importance of liquidity management in volatile markets, warning that penalising Swiss franc-denominated liquid assets would impair performance.
He said cash serves as a strategic reserve to meet short-term obligations in times of crisis, and stabilises asset allocation, adding: “The return to negative interest rates is a risky game.”
Adjusting to a low-rate paradigm
Swiss pension funds have already experienced the effects of negative rates between 2015 and 2022, adjusting by shifting portfolios away from nominal assets.
According to Swisscanto’s Pensionskassenstudie 2025, allocations to foreign equities reached a record 19.7% last year, while bond exposure declined slightly to 28.2%, following an uptick in 2023 driven by higher rates.
A renewed period of low or negative rates would likely reinforce these trends, said Publica’s deputy chief investment officer Patrick Uelfeti, with continued demand for real estate and a further retreat from government bonds.
Pension funds are reducing allocations to nominal assets, investing the proceeds in real assets such as real estate or infrastructure, he said.
Uelfeti noted that Publica’s current asset allocation already factors in a low interest rate scenario, with the implications being reassessed as part of its regular investment review.
Adriano Sbriglio, head of asset management at the CHF13.5bn Aargauische Pensionskasse (APK), acknowledged that markets were pricing in persistently low rates, but cautioned against premature conclusions.
Further forecasts would be too speculative, he said, adding: “Should this scenario materialise, our long-term investment strategy remains crucial. We do not act impulsively, but rather in a well-founded and structured manner, even in such phases.”
Sbriglio said a falling rate environment could support valuations for interest-sensitive investments and increase the appeal of risk assets such as equities and property.
“In an environment without attractive risk-free returns, real assets are therefore once again becoming more of a focus,” he said. However, he added that the downside risks, particularly on the liability side, clearly outweigh the advantages.
Real assets in focus
At Basellandschaftliche Pensionskasse (BLPK), the CHF12bn scheme for the canton of Basel-Landschaft, CIO Mathias Koller said a renewed low-rate environment would not immediately change asset allocation, though it would boost demand for mortgages and property investments.
“We will try to reduce the negative interest burden as best we can,” he said. “We will not significantly increase riskier investments or give greater preference to weaker borrowers.”
Koller said BLPK routinely stress-tests its portfolios through asset/liability management studies and has increased exposure to mortgages and selected alternative investments to support returns in low-rate scenarios.
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