SWITZERLAND - Buoyed by a strong performance from equity markets this year, Swiss private and public pension schemes had returns of 6.1% and 5.8% respectively in the first half, according to Lusenti Partners.
“This performance is a marked improvement over what these investors returned in the last few years, and the chief reason is the strong performance of equity markets,” commented the firm’s head Graziano Lusenti. In 2004, Lusenti put the return for Swiss pension funds at around 4%.
“And consider that the latest return was just for the first half. One pension fund client told me this morning that since then, its return had reached 15% following even stronger equity markets in the summer,” Lusenti said.
Lusenti queried 151 Swiss institutional investors, 97 of whom were private pension funds and 26 public sector schemes. Another 18 are foundations that manage pension money for the most part. Collectively, these institutions have CHF180bn (€116bn) in assets.
Lusenti noted that to take full advantage of the robust equity markets, these investors had allocated more to both domestic and foreign stocks. According to him, their current asset allocation entails 17.6% in foreign equities and 11.3% in Swiss equities.
Another 36% is invested in bonds, 23.5% of which are domestic paper. Another major holding is in real estate which accounts for 12.6% and whose strong performance helped boost returns.
The survey also put the coverage ratio for Swiss private pension funds – a figure used to gauge the extent to which liabilities are funded – at 107.3% on June 30. This means the schemes are slightly more than fully funded.
With an average coverage ratio of 94.1% on June 30, Swiss public sector schemes were slightly underfunded, the survey said. Under Swiss law, Swiss public pension funds are permitted to be underfunded owing to a government guarantee.
However, Dr Lusenti said the Swiss government would soon require the schemes to have a minimum coverage ratio that could be 70 or 80%.