Direct, foreign real estate, and infrastructure investments have contained the losses of the pension fund for the Swiss canton of Vaud (CPEV) last year.

CPEV’s investment strategy has returned -7.5% in 2022, the worse result since the financial crisis in 2008, when the scheme returned -12.8%, according to preliminary results published by the pension fund.

The rebound on equity markets recorded in the last quarter of 2022 did not compensate for the losses accumulated over the first three quarters of the year, the pension fund added in a note.

The performance of bond markets was negative last year, but interest rate increases will certainly lead to placing investments at more attractive rates, causing however losses for the asset class, it added.

CPEV invests 27% of its total assets in Swiss real estate, 16.3% in foreign equities, 12.1% in Swiss equities, 12.8% in bonds denominated in foreign currencies, 6.6% in bonds denominated in Swiss francs, 1.7% in cash, 3.7% in convertible bonds, 6.3% in private placements and 8% in other types of investments including indirect foreign real estate, commodities, currency hedging.

The scheme’s funding ratio stood at 68.6% at the end of 2022, practically on par with the lowest level recorded in the last 10 years (68.5%), in 2018. The scheme plans to reach a funding ratio of 75% in 2030 and of 80% in 2052.

The reform of the first pillar AHV, which lead to the increase in retirement age for women from 64 to 65 years old, both in the first and second pillar, and the VAT by 0.4 percentage points, entering into force on 1 January 2024, does not impact CPEV’s plans.

The fund’s members can choose to retire between the ages of 58 and 65, with a possible extension to up to 70 years old with employers’ agreement.

The retirement age increase for women in the first pillar pension system has instead had an impact on the duration of payment to bridge pensions.

The scheme’s board of directors has therefore decided to extend the duration of payment to reach the new retirement age introduced by the reform.

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