The €34bn Swiss public pension fund Publica is reviewing the investment strategy for the closed pension plans it manages to determine whether it is fit for purpose in light of the UK’s voting to leave the European Union.

The pension fund is a “Sammelstiftung”, an independent collective institution that manages the assets of 20 Swiss public pension schemes, seven of which are closed to new entrants.

Stefan Beiner, head of asset management at Publica, told IPE there were two main dimensions to Brexit for the pension fund – a tactical one and a strategic one.

At the tactical level, he said, Publica took a neutral position in the lead-up to the referendum, given the relatively highly probability – around 40% – of a leave vote.

This means the pension fund did not diverge from its strategic risk “budget” – by increasing equity or gold investments, for example.

“With binary events like this,” Beiner said, “either you have additional information you are really convinced by, or you take a neutral position.”

State Street’s most recent ‘Investor Confidence Index’ showed that European institutional investors’ confidence increased in June ahead of the UK referendum on membership in the EU. 

Michael Metcalfe, senior managing director and head of global macro strategy at State Street Global Markets, said: “This helps to explain why markets have moved so wildly following the vote to Leave. Investors were not reducing risk sufficiently ahead of the vote.” 

The index rose by 3.5 points to 100.3 (a reading of 100 is neutral).

The June reading had a cut-off of 22 June, so it did not account for the result of the referendum.

As to the strategic considerations relating to Brexit, Publica’s Beiner said the pension fund regularly carried out asset-liability management (ALM) processes and that it was currently considering its investment strategy for the seven closed pension plans whose assets it manages.

“We had a lengthy discussion about how to deal with a potential Brexit and defined various scenarios for interest rate curves, forward curves, etc,” he said. 

“We debated for a long time if we should define a Brexit scenario but decided against this because, if it came to this, we would need to recalculate everything anyway.”

The pension fund is therefore now re-running its ALM study using new estimates for post-Brexit markets to see if its existing investment strategy “has to be adapted, or if it is robust”, said Beiner. 

As concerns the 13 open pension schemes run by Publica, Beiner said it would carry out an extraordinary ALM study for these in the event that its risk/return assumptions for individual asset classes change significantly.