Swiss pension funds are reassessing their exposure to US dollar-denominated assets in light of rising hedging costs, growing concerns over US fiscal policy, and increasing national debt levels.
Speaking during a conference call hosted by consultancy Complementa this week, Andreas Rothacher, head of investment research, said there is now a “certain loss of trust” in the US as an issuer of sovereign debt. He cited high hedging costs and the mounting level of US public debt as key drivers of Swiss pension funds’ strategic decisions.
Swiss pension funds already began reducing or exiting foreign currency government bonds, particularly US Treasuries, last year.
This retrenchment is not limited to US sovereign debt. Thomas Breitenmoser, head of investment consulting at Complementa, added that Swiss pension schemes are also cutting exposure to euro-denominated government bonds in favour of corporate credit, while maintaining only modest allocations to sovereign bonds in foreign currencies.
He noted this is clearly linked to the rising US debt burden, which raises the question of how much longer Swiss pension funds will want to continue investing in US Treasuries.
While there is no wholesale retreat from US markets – which remain the deepest and most liquid globally – some schemes are adopting a more cautious stance. Publica, Switzerland’s largest pension fund, has already underweighted US equities and is currently reviewing its overall investment strategy.
“We are currently reviewing our investment policy and are also closely examining the allocation to government bonds denominated in foreign currencies. In doing so, we are taking into account criteria such as national debt, liquidity, the cost of currency hedging, and credit quality,” Patrick Uelfeti, deputy chief investment officer at Publica, told IPE.
Publica also points to rising debt levels in other developed markets, including China, as an additional cause for caution. As a result, the pension fund is considering a general reduction in its allocation to government bonds, Uelfeti added.
According to Complementa’s annual risk check-up report, published this week, Swiss pension funds now hold around 18.8% of assets in foreign currencies, up from 17.6% a year earlier. Overall, around half of their assets are invested abroad, underscoring the importance of currency exposure and diversification in their portfolios.
However, recent US trade policies and geopolitical tensions have weighed on performance, particularly for foreign currency equity investments. Swiss pension funds hedge roughly two-thirds of their currency risk, with the US dollar accounting for the largest single exposure at around 11%.
Complementa reported that average returns declined from 2% at the end of February to -0.6% by the end of April. The average funding ratio fell from 112.2% at year-end 2024 to 110.8% in April.
Data from Swisscanto for Q1 2025 indicated that total performance for Swiss pension funds was flat, supported mainly by strong returns from Swiss equities (8.6%) and commodities (6.3%). Funding ratios for fully and partially funded pension schemes declined only marginally – by 0.1 to 0.2 percentage points — over the quarter.
Losses were contained thanks to diversified portfolio construction, Rothacher noted, with Swiss franc-denominated bonds and domestic real estate providing a buffer against foreign currency setbacks. “Gold, as a safe haven asset, has seen strong demand this year,” he added.
Swiss pension funds continue to view gold as a key risk-hedging asset in the face of a potentially weakening US dollar, rising sovereign debt levels, and ongoing inflationary pressures.
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