SWITZERLAND - Swiss Pensionskassen returned 3.5% in the first half of this year, and consultancy Lusenti is expecting similar returns even after recent market turbulence.
Domestic equities and alternative asset classes, including private equity, hedge funds and commodities, were the main sources for the positive return, Swiss consultancy Lusenti found in its ninth semi-annual survey of Swiss pensions institutions.
The 3.5% return for the 146 surveyed pension funds - which between them have combined assets of CHF211.9bn (€126.9bn) - compares to a 0.6% return for the first six months of 2006, and analysts are optimistic the good performance will continue despite market turmoil of the last four months.
"Thanks to strong tactical overweight positions in liquid assets, institutional investors should have been better prepared for the turbulent markets in the summer months than other investors," noted Graziano Lusenti, founder and managing partner of Lusenti Partners, in the latest "Swiss Institutional Survey".
"The performance as of end October should turn out to be only slightly lower than at the end of June," he added.
Lusenti explained the increased exposure to liquid assets showed the cautious attitude Swiss institutional investors were taking towards equity investments, as the average exposure to equities is around 30%.
"This attitude has definitely paid off during the market turbulence of the summer," said Lusenti.
However, although the average funding level for all Pensionskassen was 100% for the first time ever, the study notes this positive development is probably short-lived as "in most cases, the reserves in the fund are too low to withstand major trend reversals in the financial markets" including the equities, bonds and real estate sectors.
Increasing efforts by public bodies to fill the deficit in their pension funds pushed the average funding level of public Pensionskassen from 103.5% at the end of last year to 106.7% at the end of June.
This means the gap between the funding levels of public and private pension schemes is closing, but the average private fund remains at a 117% funding level.
The survey also showed a continued trend towards more diversification as the percentage of alternative assets in the combined portfolios of the Pensionskassen reached 6%.
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