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Swiss pension funds boost alternatives - CSAM

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SWITZERLAND – Swiss pension funds have raised their allocation to alternative assets to 1.8%, Credit Swiss Asset Management says.

Alternative assets are now worth almost nine billion francs (5.8 billion euros), CSAM said in its second-quarter Swiss Pension Fund Index.

This is the third successive quarter that has seen a higher alternative allocation, CSAM said.

The real property allocation has gone down 0.1 percentage points to 11%. But compared with the first quarter of 2004, “little change” in the weighting of most investment categories has been recorded.

“The average pension fund continues to display a greater spread in bonds and real estate than is true for equities and liquidity,” CSAM said.

The index revealed a “relatively sharp” decrease in the allocation to foreign equities - down from 16.4% to 14.9%, while Swiss equities had a 0.4 percentage point rise.

The allocation to domestic bonds rose by 0.9 percentage points to 33.4%.

“This increase is more a result of shifts in favor of the Swiss franc than anything to do with bond market developments over the last three months.”

Combined with “a slight shrinkage” - 0.6 percentage points - in the foreign bond allocation, this results in a slight increase in the bond weighting to 43.7%

The liquidity allocation rose 0.4 percentage points to 7.2%, against a backdrop of rising interest rates.

Pension funds with 150 to 500 million francs (97.5 million euros to 325.3 million euros) in assets under management “significantly outperformed” both the index and the other pension funds, while the largest ones have under-performed the index for the past two years.

In the second quarter, however, larger funds have “gained ground” on the index and the other pension funds, CSAM said.

As for currency allocation, the euro and in particular the US dollar spread have decreased, while the Swiss franc spread has barely changed.

The second-quarter review also reveals that the level of assets estimated to be around 500 billion francs, has slipped down to its starting value of four years ago in the second quarter of 2004

For the first time in four quarters it “slightly deteriorated”, slipping 0.68 percentage points from 101.65 to 100.97.

“If this slippage were extrapolated to include all assets managed by independent Swiss pension funds, the resultant loss of asset value would be around three billion francs in absolute terms,” CSAM said.

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