The climate strategy and the exclusion policy for the Pensionskasse of the city of Zurich (PKZH) set in 2020 drove the performance of its Swiss and developed countries’ equity portfolios, according to its financial results published last week.
Swiss equities returned 4.1%, above its benchmark 3.5%, while equities in developed countries achieved 15.6% in returns (currency hedged), 1.6 percentage points above its benchmark of 14.0%.
Equities made up 28.3% of the Pensionskasse’s portfolio last year, down from 29.3% in 2019. Emerging market equities yielded 13.3% (currency hedged), below its benchmark of 17.3%.
Swiss-franc denominated bonds returned 0.5% against a 0.4% benchmark. Swiss real estate yielded 7.2% against a 7.8% benchmark. In terms of foreign real estate, PKZH invests in real estate in US, European and Asian real estate investment trusts (REITs) with a focus on rental properties and in a real estate investment foundation.
The fund has invested 9.3% of the assets indirectly in Swiss real estate and 4.5% in foreign real estate. Its REITs returned -11.3% (currency hedged), while the investment foundation’s sub-funds achieved a consolidated performance of -0.2% last year (currency hedged).
Overall, the fund’s foreign real estate allocation returned of -5.0% (currency hedged) and thus performed 0.1 percentage points worse than its benchmark.
Its hedge fund portfolio achieved a return of 5.5% in 2020, currency hedged in Swiss francs, well below the benchmark of 16%, which is mainly the result of a restructuring of its hedge fund portfolio and also due to a change in its benchmark during the year.
The share of hedge funds in its portfolio was reduced from 7.2% in 2019 to 6.1% in 2020.
PKZH’s private equity investments reached 14.2% returns (currency hedged) and accounted to 7.7% of its total portfolio in 2020.
Overall, PKZH achieved a return of 6.5% last year, below its strategic benchmark of 8.4% but above the target of 5.7% necessary to finance pension benefits.
Its funding ratio rose to 117.8% at the end of 2020 compared with 116.9% the prior year. Asset under management stood at CHF19.6bn (€17.9bn) in 2020 compared with CHF18.5bn in 2019.
Asga’s performance below benchmark
Asga Pensionskasse, the provider of occupational pensions for small and medium-sized companies, delivered a performance after costs of 5.21% in 2020, below its benchmark of 5.26%, according to a financial statement published in April.
Swiss equities progressed by 3.18% and foreign equities by 5.20%, while corporate bonds generated a performance of 2.45% and bonds in Swiss francs of 0.66%. Assets under management totalled CHF21.72bn.
The largest share of the assets was allocated to foreign equities (22.1%), followed by Swiss bonds (21.4%), Swiss real estate (13.6%), Swiss equities (10.3%), corporate bonds foreign currencies (7.6%), foreign real estate (7.2%), senior secured loans (3.5%), infrastructure (3.2%), private equity (2.9%), cash (4.2%), and timber and agriculture (0.3%). it also invests2.8% in a drawdown management portfolio and 0.9% in other assets.
The funding ratio went up year-on-year from 114.2% in 2019 to 116.9% in 2020. It added 595 firms as members last year for a total of 14,571.
The pension fund designed a new investment strategy last year to expand its investment universe by addeing emerging market debt and mortgages in Swiss francs. It also strategically increased its equity quota slightly.
It adopted the Swiss Association for Responsible Investments’ (SVVK) exclusion list on its investments last year. The fund plans to measure climate risks annually in selected asset classes and it is currently evaluating ways to reduce the negative climate impact of investment activities and the risks of global warming on its investment portfolio.
Equities push Credit Suisse Pensionskasse results
The Pensionskasse for bank Credit Suisse recorded a 6.2% performance at the end of 2020, compared with 11.3% the prior year, according to a financial statement issued last month.
Equity and bond investments contributed the most to the overall performance with 2.0% and 2.4% returns, respectively. Real estate and alternative investments contributed with 0.9% and 0.8%, respectively.
The pension fund’s funding ratio increased from 116.4% in 2019 to 120.5% in 2020. Total assets increased by CHF100m to CHF18bn.
The fund allocated mostly to bonds (29.5%), equities (26.9%) and real estate (18%) last year. Total liquidity and money market investments including derivatives reached 5.9% last year.
Within alternatives, it invested 2.9% in hedge funds, 7.6% in private equity, 2% in insurance-linked investments, and 2.4% each in commodities, infrastructure and senior secured loans.
CPV/CAP hunts for returns
The pension fund for the Swiss retail and wholesale company Coop-Gruppe, CPV/CAP, recorded a performance of 3.9% in 2020. Its funding ratio rose to 118.2% in 2020 compared with 116.1% the prior year.
Asset under management stood at CHF10.8bn last year, up from CHF10.3bn in 2019. CPV/CAP focuses on investments in alternatives and real estate assets to generate further returns, it said in a financial statement published at the beginning of May.
Alternative assets also include renewable energy investments and private equity. In 2020, the fund invested in a Dutch solar park with an output of 35 MWp and further expanded its portfolio with several smaller private equity investments with a focus on technology. Its climate strategy is integrated into its investment process.
The fund has allocated 22.1% to Swiss real estate, 19.8% to foreign equities, 17.4% to Swiss bonds, 11.3% to alternatives, 11.3% to foreign currency bonds, 7% to Swiss equities, 4.7% to foreign real estate and 6.4% to cash.
Equities pushed the scheme’s performance in 2020 with 6% returns, while foreign real estate returned 4.4%, Swiss real estate 5.1%, foreign equities 7%, Swiss equities 3.6%. Meanwhile alternatives returned -1.7% and foreign currency bonds -1.2%.
APK ends below benchmark
The Aargauische Pensionskasse (APK), the pension fund for the employees of the Aargau canton, generated returns of 3.8% on assets last year, below its 4% benchmark.
Equities, real estate and commodities contributed to the result. APK’s assets amounted to CHF12.1bn at the end of the year, up by CHF500m year-on-year, it said in a financial statement published last month.
The net return from directly held real estate assets amounted to just under CHF44.6m in the year under review and the net performance was 6.3%, compared with 4.8% in the previous year. Foreign equities yielded 6%, emerging market equities 9% and indirect investments in Swiss real estate 7.7%.
Equities represent the largest share of assets in the fund’s portfolio with 14%, followed by mortgages and loans (13.6%), Swiss equities (10.1%), Swiss bonds (9.1%), direct Swiss real estate (6.6%), Swiss real estate investment foundations (6.2%), indirect Swiss real estate (4.6%), indirect foreign real estate (hedged) (3.9%), commodities (3.3%), infrastructure (4%), private debt (1.9%), insurance-linked securities (2%), foreign government bonds (3%), foreign corporate bonds (4.8%), emerging market debt hard currency (3.3%), emerging market debt local currency (1.1%), emerging market equities (4.3%) and cash (3.3%).
APK’s funding ratio fell slightly from 104.9% in 2019 to 104.2% in 2020.
APK’s board of directors defined a climate strategy to address physical and transitional risks that may arise due to climate change. It has adopted a new benchmark at the beginning of 2021 that underweigh high CO2 emitters and overweigh companies with low carbon emissions.
PKBS misses target after adjusting strategy
The Pensionskasse for the city of Basel (PKBS) delivered a 2.68% performance figure in 2020, slightly below its 2.85% target, according to a financial statement published in April.
Last year, PKBS decided to underweight its equity and bonds investments to fend off volatility and negative interest rates, while acquiring residential real estate properties to expand investments in the asset class.
The pension fund allocated 24.3% of its assets to Swiss real estate, 20% to foreign equities, 13.8% to Swiss equities, 11.2% to bonds, 7.2% to alternatives, 5.1% to foreign real estate, 3.6% to convertible bonds, 5.7% to loans, 5.7% to mortgages and 3.4% to cash.
Its funding ratio fell by 2.1 percentage points year-on-year in 2020, from 105.2% in 2019 to 103.1% in 2020 as a result of a drop in the technical interest rate to 2.25% and additional provisions in the volume of 2.5% of the pension capital.
PKBS’s assets under management amounted to CHF13.91bn last year compared with CHF13.59bn the prior year.