SWITZERLAND - Publica, the The CHF33bn (€20bn) Swiss pension scheme for public workers, posted a 4.5% return for its portfolio for 2006.

Despite almost halving returns compared to the 9.85% reported in 2005 and being well below the Swiss average of 6.9% the Pensionskasse still managed to beat its own strategic benchmark by 0.45%.

In its annual report, Publica said this return was achieved "without additional risk". Indeed, figures reveal the pension scheme has increased its exposure to bonds from 44% to 63% over the last year. Investment in equities only made up 24% of the portfolio, down from 25% while the Pensionskasse also had 9.3% of its portfolio invested in real estate and mortgages - an amount similar to last year.

However, as shift from a defined benefit to a defined contribution scheme is currently being implemented, the pension scheme also announced a "review of the strategic asset allocation because of the new retirement provision environment".

The pension scheme, with 53,000 active members and 50,000 pensioners, is now 108.8% funded, up from 107.6% a year before. However, surpluses will not be paid out to members until Publica reaches a 115% funding level.

"The necessary reserves to absorb market dips have not been built up to a sufficient level," explained Publica president Hanspeter Lienhart and director Werner Herzog in the annual report.

They also pointed out negative influences on bond yields reduced the pension scheme's performance.