SWITZERLAND - The CHF30bn (€20.3bn) public service pension fund Publica saw its funding levely drop by over 10 percentage points to 95.8% over the last year.
The fund returned -6.86% (compared to 1.28% in 2007) which is a better performance than the average Swiss fund with around -13%. (See earlier IPE story: Swiss funds hit historic returns low)
“We have quite a boring asset allocation,” joked Werner Hertzog, director of Publica when talking to IPE.
Publica is only invested in equities, bonds, domestic real estate and clients’ mortgages.
The worldwide diversified bond portfolio, which only contains government and investment grade papers down to A, returned 5%.
“The losses were in the equities portfolio,” confirmed Hertzog.
Strategically, Publica has set the equity exposure at 23% with a tactical margin of +/- 4 percentage points.
“We try not to fall under the tactical minimum level of 19% and if we do we rebalance when it makes sense,” pointed out Hertzog.
He added as the equity quota was very low compared to other Swiss funds it was easier for Publica to hold the exposure even in difficult times.
Despite the funding level having dropped from 106.7% to 95.8% Publica sees no immediate need to take any measures and has confirmed this with an ALM-study.
It showed the underfunding has not occurred because of structural problems but solely because of adversary market conditions.
However, should the return drop further measures will have to be taken, Publica noted in a press release. (See earlier IPE article: Credit crunch eats up Publica reserves)
If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com
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