Swiss Pensionskassens’ allocation to alternative assets reached an “all-time high” last year, Credit Suisse noted in its quarterly survey.
The share of alternative assets (not including real estate or mortgages) climbed 127 basis points during the year to 6.86% at the end of December 2016.
In Credit Suisse’s survey of its pension fund custody clients, the category “alternatives” comprises hedge funds, commodities, and private equity.
The share of commodities in portfolios increased, from 2.33% to 2.85% year-on-year, and contributed positively to returns, Credit Suisse said.
The quota for hedge funds and private equity investments increased to a similar extent: private equity from 0.64% to 1%, and hedge funds from 2.62% to 3%.
The other major Swiss bank, UBS, using a different sample for its extrapolation of pension fund returns, calculated a slight drop in hedge fund exposure – “despite a solid annual return of 3.9%” in that asset class.
Overall it also noted an increase in the exposure to alternatives to 8%.
Other performance drivers, according to UBS, were real estate (6.27%), global equities (9.89%), and foreign fixed income (4.68%).
As larger pension funds in general have a greater exposure to alternative and foreign assets as well as real estate, the statistics show them performing better in 2016.
According to UBS, Swiss Pensionskassen with assets under management over CHF1bn (€820m) returned 3.91% over the full year while the extrapolated average overall was 3.41%.
In its quarterly update on pension fund statistics Prevanto pointed out how different return averages are depending on the sample used. The pension adviser compared the 2016 average reported by Credit Suisse (4.06%), to that of the Swisscanto Monitor (3.52%), UBS (3.41%), and the Pictet BVG 25 Plus benchmark index (3.37%).
Prevanto also pointed out the continuing wide gap between the average funding ratio of public pension funds (92.9%) and that of private pension funds (110.7%) as of 31 December.
Earlier in January, Willis Towers Watson had calculated an aggregated overall average funding ratio of 96.8%.