SWITZERLAND - The SFr19bn (e12.8bn) Canton of Zurich (BVK) pension fund has scrapped a currency overlay mandate with State Street, citing disappointment with the results compared to the cost of the programme.

Daniel Gloor, head of portfolio management at the fund says the currency overlay strategy didn’t produce the expected results, but adds that he wasn’t particularly surprised:
“ We looked at the programme over five years or so.
“ There was no problem with State Street but the programme was not securing or making currency management better in relation to its cost.
“It wasn’t a problem with the programme, it was a problem with executing and executing costs.”

Gloor notes that the fund has also had a number of major meetings on the question of its independence from the sponsoring Zurich Canton.
“It’s going quite smoothly now, the bill will go up to up to the government and then to the parliament and we are quite confident that we could get independence by the beginning of 2003 at the earliest.”

However, he notes that the fund has been fairly badly stung by the collapse of national air carrier Swissair – having to write off around SFr11m in assets following the bankruptcy.
“It’s not agreeable but it is not a catastrophe,” Gloor notes.
He adds that the Canton itself was worse hit by Swissair’s demise, losing SFr42m – as it held around 3% in Swissair shares.