SWITZERLAND – The SFr 17bn (€11.7bn) Civil Service Insurance Fund (CSIF) of the Swiss canton of Zurich has altered its investment strategy to halt a slide in the returns on its investments which fell to –7.1% in 2001. A spokesman for the fund says despite the changes, CSIF is still struggling to return to positive figures.

CSIF has sold its foreign currency bond holdings in two Swiss institutional investment trusts, worth SFr 123m, and has closed its seven year-old US and Canadian dollar and sterling hedging programme. Both moves were related to poor performance and cost.

The proceeds from the sales were re-invested in convertible bonds and the spokesman confirms the strategy is now more conservative.

“We can’t afford to take on more risk at the moment, though we have resisted divesting our equity portfolios, except for emerging markets stocks which we have completely sold. However, we are approaching equities with some prudence,” says the spokesman.

“We are holding out from investing in Swiss equities at the moment and any investments in overseas equities will be index-linked or in small and mid-cap US stocks and private equity,” he explains.

The spokesman stresses, however, that the changes to the strategy are only short-term. “We expect the markets to eventually return to a healthy state where returns on investments will reflect fair market values.”

The fund’s returns had begun to show modest improvements until last month’s crashes. “In June the investment returns were –5%, against a benchmark return of–4.7%, but following last month’s stock market’s crashes, I dread to think what July’s figures will be. We may well see returns as low as –10%,” he comments.

“We are basically at the mercy of the markets at the moment. We thought at the beginning of this year we had put the ups and downs of the previous two years behind us. But there appears to be no let up.”