SWITZERLAND - The majority of Swiss pensions funds have recovered to full funding levels, but only 10% have repaired their buffers, according to Swisscanto.

Based on the findings of its tenth annual survey of Swiss Pensionskassen, the asset manager concluded that current asset allocation makes buffers of 15% and more necessary.

Among the 278 pension funds surveyed - with combined assets of CHF379bn (€271bn) - only 10.9% were above a 115% funding level, although 44.5% reported a cover ratio of between 105% and 115%.

At the end of 2009, approximately one-third of Swiss private sector funds and three quarters of public sector funds remained underfunded. (see earlier IPE-story: Real estate lowered Swiss returns in 2009).

The average strategic asset allocation (SAA) was similar to that of 2004 - another post-crisis year - which Swisscanto pointed out was proof that shifts in the SAA in recent years were only down to market movements rather than active changes.

"Swiss funds remain very constant in their asset allocation, much more so than for example funds in the UK or the US, and we think this is a good thing," said Gerard Fischer, CEO of the Swisscanto Group. (see earlier IPE story: Most Swiss trustees held their nerve during the crisis).

One-third of funds in the survey said they changed their SAA after the crisis mainly because of their changed risk budgets.

The average fund still has around 38.5% in bonds, 27% in equities, 18.5% in real estate, 5% in alternatives and the rest in liquid investments.

Currently, the actual asset allocation of Swiss pension funds matches their SAAs almost exactly. Only in bonds and alternatives did Swisscanto find funds underweight by two and one percentage points respectively, as more assets than planned were held in cash.

The asset manager said this caution was down to lower returns in the government bond sector and disappointment with alternative investments during the crisis. "However, recent data shows that there might already be a slow turnaround when it comes to alternative investments," Swisscanto noted.

Only 30% of private sector funds and 50% of public funds said they had used the market crash to buy equities at the beginning of 2009. Similarly, 45% of private and 32% of public funds did not rebalance their equity exposure in the first quarter of 2009.

For more on Switzerland see Pensions in Switzerland in the June edition of IPE.