Swiss Pensionskassen are gradually dialling down their private equity exposure as they exit existing funds and are reluctant to make new commitments, investment consultants say.
“The reasons are high costs, the relative unattractiveness compared to listed equity, and the limited availability of funds for mid-sized pension funds,” said Alexandra Tischendorf, head of investments at WTW Switzerland, who pointed to examples of historic underperformance against the global equity market.
Private debt, by contrast, is slightly overweighted, while allocations to Swiss real estate remain largely unchanged. “Many pension funds are considering reducing or scaling back their foreign real estate investments,” she added.
Swiss pension funds have strategically increased allocations to infrastructure in recent years, often with a focus on clean energy, according to Marc Staub, managing director at consultancy PPCmetrics. He agreed that real estate also remains in demand.
Rising rates and a more attractive interest rate environment are one reason Pensionskassen are turning away from private equity, according to Staub.
“We are currently observing that at the end of the term of some private equity funds, investments remain in portfolios and are not divested as planned. Some of these positions are sold into successor funds or to other providers. It is crucial to critically examine the process and pricing,” he added, echoing concerns about fund performance.
Migros Pensionskasse, the CHF29.5bn (€32bn) pension fund of the Swiss retailer, is among those opting to refrain from making further investments in private equity.
The pension fund’s strategy for 2025-29 instead foresees increasing investments in infrastructure.
“We have not had private equity in our strategy since 2021. Private equity now represents a small run-off portfolio, significantly less than 0.5% of the assets,” said chief investment officer Stephan Bereuter.
BVK, the CHF43bn pension fund for employees of the canton of Zurich, is also excluding private equity from its asset allocation.
Assessing opportunities
Philipp Weber, head of investment consulting at Mercer Switzerland, divides pension funds into three groups with regard to private market investments.
One group invests selectively in private markets, often in open-ended structures, for example, in core infrastructure, Weber said, adding that the introduction of infrastructure as a separate asset class was one of the main drivers for increasing private market investments.
Some pension funds believe in the diversification and return potential of private market investments, such as private equity, while others do not believe in these asset classes at all due to high fees, complexity, and perceived opacity, Weber continued.
The CHF42.5bn federal fund Publica is refraining from investing in private equity for a variety of reasons, including opacity, key-person risk and excessive fees, the fund’s head of private markets Dominique Gilgen said recently in an interview with the financial publication Bilanz.
However, the CHF30bn multi-employer Asga Pensionskasse is preparing two private equity mandates in the coming years, according to reports.
Mercer’s Weber pointed to numerous opportunities for reinvestment and reallocation.
“Currently we’re seeing many large investors specifically expanding private market segments such as co-investments and secondaries, which appear particularly attractive in the current environment,” he said.
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