Switzerland’s biggest pension investor has adapted its investment strategy to “reduce risk” across its portfolio.

The CHF39.8bn Publica, which caters for public sector workers, started to reduce its equity quota in July, from 29% to 27%. In turn it increased its international real estate allocation from 4% to 6%.

It also reduced the exposure to Swiss non-government bonds by 200 basis points to 8%, and said it would use the proceeds to make investments in private real estate financing and emerging market debt.

Money from reducing investments in non-Swiss public corporate bonds would go into “private company and infrastructure debt”, Publica said.

These two segments would make up 7% of the portfolio, the asset owner said, once the new strategy was fully implemented over the next three years.

“Compared to public corporate bonds these asset classes offer additional return and increase diversification in the overall portfolio,” Publica said.

Credit Suisse’s latest Pensionskassen Index for the second quarter of 2018 showed this shift in allocation was in line with a general trend.

The analysis of a representative sample of the Swiss pension industry showed an increase in real estate exposure by 44 basis points, to 22.84% on average.

“This development can mainly be explained by an increase in indirect real estate investments abroad,” Credit Suisse stated in a press release.

Alternative investments were also increased to just over 6%. For all other asset classes the analysts reported a slight decline, mainly caused by market effects.

Over the first half of the year foreign equities were the only asset class to return over 1%. Other positive contributors were real estate and alternatives with gains of just under 0.5% each.

However, these returns were not enough for an overall positive average return at the end of the second quarter: at the end of June Swiss schemes had lost 0.48% on average, despite a “significant recovery” in April.

Credit Suisse said that both foreign and domestic bonds had underperformed their respective indices.