Swiss pension funds navigated a volatile and uncertain year largely unaffected by concentration risks in Swiss and global equity markets, ending 2025 with positive overall returns.
Among Switzerland’s largest listed companies, Novartis and Roche “posted impressive returns” of well over 20% each, outperforming the wider equity market, while Nestlé lagged the overall index, said Andreas Rothacher, head of investment research at consultancy Complementa.
The SMI TR index of the 20 largest companies was only slightly ahead of the broader total equity market index.
“Thus, in 2025, index concentration in Switzerland did not negatively impact the overall [capital-weighted] return. For global equities the capital-weighted and equal-weighted indices performed almost identically in 2025,” Rothacher added.
Index concentration remains a discussion point for Swiss pension funds investing in equities by market capitalisation.
“It would be possible to invest in equally weighted rather than capital-weighted indices, but this would not generate excess returns in the long run. It is also questionable whether an equally weighted approach truly reduces risk,” Rothacher said.
Diversification should not be “an end in itself” but a means to strengthen portfolios and make them more resilient, he added.
Equity exposure pays off
Swiss pension funds recorded an average performance of 5.9% last year, corresponding to investment returns of CHF70bn, driven mainly by global and Swiss equities, according to Complementa.
Strategies tilted towards higher equity allocations delivered stronger returns than those with lower equity exposure.
For example, portfolios with 15% equity and 10% real estate exposure returned 2.5%, while those with 50% equity and 30% real estate exposure returned 7.8%, according to a research paper published by consultancy PPCmetrics.
Publica returned 6.60% last year, beating its 6.54% benchmark, according to PPCmetrics.
The CHF30.2bn pension fund for Swiss retailer Migros Pensionskasse returned 6.5%, with its funding ratio increasing to 136.2% from 132.8% in 2024.
The CHF23.7bn pension fund of the city of Zurich (PKZH) delivered a 6.8% return, lifting its funding ratio to 123.1% in 2025 from 121.3% a year earlier.
The average funding ratio of Swiss pension funds stood at 114.4% at the end of 2025, up from 111.8% at the end of 2024. Pension funds applied an average interest rate of 4.3% on members’ savings in 2025 – the highest level in 25 years – according to Complementa estimates.
The benchmark return of Swiss corporate pension funds was 3.2% last year, down sharply from 10.1% in the previous year. Nevertheless, funding ratios rose to an average of 128.5%, the highest level in two and a half years, according to WTW.
Looking ahead, Swiss pension funds are likely to focus discussions on further diversification into alternatives and on foreign currency hedging at the asset-class level, rather than adjusting overall FX hedging ratios, Rothacher said.
Corporate pension funds, meanwhile, are increasingly turning to cashflow-driven investment (CDI) strategies, particularly for liabilities with fixed payment profiles, aligning investment returns with expected cash flows to reinforce portfolio resilience compared with traditional duration-based approaches, said Alexandra Tischendorf, head of investment at WTW Switzerland.
