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IPE special report May 2018

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Swiss first-pillar fund AHV reshuffles fixed income portfolio

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  • Geneva, Switzerland

Switzerland’s first-pillar AHV fund is shifting its portfolio away from alpha towards bonds, according to Christoph Zimmermann, head of external investments.

In a panel discussion at the Swiss pensions conference Fachmesse 2. Säule, Zimmermann said the CHF30bn (€24.5bn) fund had now invested 10-15% of its 70% fixed income allocation in senior loans, high-yield bonds and emerging market debt.

He said another segment the fund was looking to for diversification was convertible bonds.

“We have had positive experiences with senior-loan fund products, especially in Europe, as they are very liquid, which was not the case in the past,” he added.

Marco Netzer, chairman of the board at AHV, pointed out to IPE earlier this year that the portfolio served the needs of three different funds combined under the Compenswiss umbrella.

This, he said, necessitated a relatively conservative approach to investment.

The fund also manages money for invalidity compensation scheme IV (CHF4.7bn) and EO, the scheme for people in military service or on maternity leave (CHF600m).

At the conference, Zimmermann said the the AHV was “very content with the equity share of 24% ex real estate equities”, which adds another 6% to the fund's equity allocation.

He said the fund had “not yet looked into smart-beta strategies” such as low volatility or dividend strategies, as “around 50% of a total return on equities comes from dividends anyway”.

“This means you already have a spread between the dividend yields and bonds, which is very comon in Germany, France, Switzerland and the UK at the moment and slightly less so in the US – this makes the case for a Nestlé share rather than a bond,” he said.

This year, the fund will “continuously add indirect Swiss real estate funds” to the portfolio, as costs for the funds “have come down over the last year, from which we are profiting”.

Infrastructure, on the other hand, was “not an option” for the AHV, as the fund has a shorter time horizon relative to other schemes, Zimmermann said. 

At the same time, the AHV has also announced it would diversify its real estate exposure to other parts of Europe and the US. 

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