Switzerland's BVK stands by "aggressive" strategic asset allocation
SWITZERLAND - The Swiss Pensionskasse for civil servants in the canton of Zürich (BVK) has decided to stick with its current strategic asset allocation (SAA) despite the fact a recent asset liability study (ALM) found it aggressive.
The study, carried out by Swiss ALM-expert c-alm last year, said the fund's SAA was "rather aggressive", but within "justifiable limits".
According to the SAA in place until 2012, the fund aims to invest 12% in cash or money market instruments, 11% in domestic bonds, 8% in FX bonds, 5% in convertibles, 4% in mortgages, 12% in domestic equities, 17% in foreign equities, 11% in alternatives and 20% in real estate.
Last year, the BVK had been slightly overweight cash (14.8%), FX bonds (9.2%), mortgages (5.4%), domestic equities (12.7%) and real estate (20.9%).
The BVK was underweight all other asset classes, but all investments were within the limits for tactical movements.
The fund said it would stick with its SAA, being "mindful" of the fact a further risk reduction would put more pressure on the fund's recovery.
The BVK also said it would look into possible recovery measures, as c-alm determined a full recovery would not be possible within due course through yields on investments alone.
At the moment, the fund is shifting money from the active to the retired members' portfolio because the conversion rates are calculated with a higher discount rate (4%) than the anticipated market yield (3%).
According to its annual report, the fund returned 11.2% in 2009, increasing its funding level to more than 87.3%.
By year-end 2008, the market crash had set the fund back to 81% from a full funding level 12 months earlier.
The BVK, the second-largest Pensionskasse in Switzerland, made headlines earlier this week when it emerged its "head of asset management" had been arrested for alleged misconduct and corruption.
In a statement, the canton's financial department emphasised the investigation had no effect on the fund's CHF23.5bn (€17bn) of assets.