SWITZERLAND - Assets held by Swiss pension funds, known as Pensionskassen, took a beating in the second quarter, falling by CHF13.5bn (€8.6bn) to less than CHF580bn, according to the Swiss bank Credit Suisse.
Credit Suisse attributed the fall in Pensionskassen's assets to both "higher interest rates and an unstable market environment". Like other pension funds with long-term liabilities, Swiss Pensionskassen are highly exposed to fixed income.
However, the funds also have a good portion - between 20-30% - invested in equities and were thus hit by the steep market correction in those markets during May and June. Another 20% of assets held by Pensionskassen are invested in real estate, private equity and hedge funds.
As further evidence of a rough second quarter for the schemes, Credit Suisse said its Pensionskasse performance index fell by 2.27% after advancing in each of the seven previous quarters. As a result, the bank said the average performance of the schemes was 2.89% behind a legal benchmark.
It added that smaller Pensionskassen with between CHF150m and CHF500m in assets had a better performance than bigger ones, or those with more than CHF1bn in assets.
Swiss Pensionskassen lobby ASIP is to unveil performance figures for its members later this month. Last February, ASIP reported that its members had their best performance ever in 2005, earning 13% on their assets.
Despite the strong return, ASIP said several pension funds needed "several more years of bullish equity markets" to build up reserves and thereby better withstand sudden market fluctuations.
Meanwhile, WM Performance Services, a Zurich-based unit of State Street Bank, also said its Pensionskasse index fell in the second quarter by 3.1%.
"This is worst quarterly performance for the schemes in three years. And the situation is especially difficult for those Pensionskassen who have not yet rebounded from past weakness," commented Reto Tschäppeler, head of WM Performance Services.
Indeed, several Swiss Pensionskassen, especially public ones, have suffered from chronic underfunding caused in part by the crash of equity markets between 2000 and 2003.